Saturday, August 18, 2018 /`10.35AM / ARM Research
Eurozone Q2 18 GDP trumped analysts’ expectation after expanding 0.4% QoQ (Q1 18: +0.3%). The sturdy performance was supported by solid momentum in Germany (region’s heavyweight), Netherland and Latvia. Over in the United Kingdom, headline inflation inched higher by 2.5% YoY in July after holding steady at 2.4% YoY in the prior three consecutive months.
July CPI was largely driven by higher transport inflation. Elsewhere, U.S retail sales trumped expectation in July with the Commerce Department reporting a 0.5% MoM increase (June 18 revised: 0.2% MoM). We highlight that the rise in retail sales was supported by tightening labour market with knock-on effect driving higher wages.
According to data released by the National Bureau of Statistic, Nigeria’s inflation slowed further in the month of July, moderating to 11.14% vs 11.23% in the previous month. Amidst favorable base effects, the decline was driven by softening consumer prices in the food and core basket with headline MoM inflation declining 11bps to 1.13% (June: 1.24%).
Elsewhere, Q2 18 debt stock released by the DMO revealed that total FG debt stock (domestic & external) moderated 2% QoQ (+13.6% YoY) to N18.9 trillion. Elsewhere, we observed a jump in domestic debt service (+26% YoY to N297 billion) despite domestic debt stock rising just 1% YoY. We link this to maturities of high yield Treasury Bills issued in 2017. Likewise, external debt service inched higher by 247% YoY to $202 million reflecting interest payments vis-à-vis the 2027 and 2047 Eurobonds issued last year.
The Nigerian equity market extended losses for the third consecutive week as the index dipped 51 basis points WoW to close at 35266.29pts. The sell pressure was fueled by losses in UBA (-11.64%), Flourmills (-10.57%), Dangote Sugar (-4.52%), Nestle (-3.85%), Zenith (-3.18%) and Guaranty (-2.56%) which largely masked gains in Unilever (+4.76%), FBNH (+2.08%), and Dangote Cement (+2.80%).
Analyzing the performance on a sectorial basis, the sectors that closed negative outweighed those that closed positive with the Banking, Food, Insurance, Oil & Gas and the Real Estate sectors closing negative while the Brewers, Cement and Personal Care sectors closed the week positive.
Yields in the fixed income market continued its uptrend following the bearish run at both ends of the curve. Firstly, following foreign sell off at the long end of the curve, secondary market yields ticked higher on most trading days. This in addition to higher stop rates at Wednesdays’ Bond Auction (Bond sale: N110.1 billion) drove bond yields higher by 49bps WoW to 14.56%. Yields at the short end followed similar pattern with sell pressure exacerbated by CBN’s liquidity squeeze on Thursday (OMO sale: N153.5), culminating in an 18bps WoW expansion in treasury bill yields to 12.69%.
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