Wk4 (July ’24) – Weekly Market Report

Key events on the Global Scene:

• US weekly jobless claims jumps amid seasonal volaitility as unemployment claims increases; S&P 500 closed lower depreciating by 0.5%.
  
• The US economy grew at a faster than expected pace in the second quarter. Th US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.8% during the period, well above the 2% growth expected. This reading came in higher than first quarter GDP, which was revised down to 1.4%. Core PCE Personal Consumption Expenditures index grew by 2.9% in the first quarter, above estimates of 2.7% but significantly lower than 3.7% gain in the prior quarter. This implies the June PCE rose at 0.28% M/M (Exp. 0.1%). The data’s release sets a pace as Federal Reserve will start cutting interest rates and if the central bank can achieve a soft landing, where inflation comes down to its 2% target without a significant economic downturn.

Key events on the Domestic Scene:

Nigeria Inflation Pressures Remain Persistent, With Headline Inflation Surging to 34,19% from 33.95% YoY; Naira weakens further ,depreciating by 0.19% to close at N1,566.82 at the I&E Window.

• Nigeria’s headline inflation for the month of June accelerated to 34.19% Year-on-Year from 33.95% in May. Monthly headline inflation increased to 2.31% m/m in June after declining for three consecutive months – March (+3.02%), April (+2.29%), and May (+2.14%). Similarly, food inflation increased 2.55% m/m in June, up from 2.28% m/m in May, while core inflation rose to 2.06% m/m in June, from 2.01% m/m in May.
  
• At the recent N T-bill auction, the DMO offered ₦277.96bn, and received a total subscription of ₦373.95bn , across the 91-, 182-, and 364-day papers on offer; 95% of the subscription was for the 364-day paper. 364-day paper received 93% of the total allotment. Stop rates printed higher by 220bps, 206bps, and 86bps for the 91, 182, and 364-day papers, respectively. Post-auction, the NTB secondary market saw improved activities. Unmet bids at the PMA filtered into the NTB secondary market, with mid and far-dated papers enjoying most of the traction. Overall, the average benchmark yield declined by 2bps to close at 24.65%. We expect prevailing market conditions to persist, albeit at a moderate pace.

Capital Market Review/Outlook (FI and Equities):

• The Eurobonds market concluded the week with a downward price trend, as the average mid-yield across the Nigerian curve rose by 8 bps to 9.99%. In the US, GDP growth in Q2’24 climbed to 2.80%, exceeding the market forecast of 2.10% and the 1.40% recorded in Q1’24. Furthermore, the US Core PCE Price Index remained at 2.60%, aligning with prior data and the consensus estimate.
  
• The Nigerian bourse market traded bearish as the All-Share Index and market capitalization declined by 2.33% WoW to 98,201.49 and N55.51 trillion, respectively. The market’s performance stemmed from sell pressures in the heavyweight counter- DANGCEM (-9.99% WoW), alongside the tier-1 banking tickers: UBA (-7.88% WoW), FBNH (-4.76% WoW), ZENITHBANK (-3.11% WoW), ACCESSCORP (-4.64% WoW), and GTCO (-2.11% WoW). Consequently, YtD return moderated to 31.3%.
  
• The Industrial Goods (-5.89%), Oil & Gas (-0.54%), banking (-0.33%), and Consumer Goods (-0.14%) indices recorded negative returns on the back of selloffs in DANGCEM (-9.99%), ETERNA (-10.00%), ACCESSCORP (-2.63%), and DANGSUGAR (-1.32%), respectively. Conversely, the Insurance (+0.32%) index recorded positive returns following buying interest in WAPIC (+7.50%)
  
• The FGN local bonds market also closed the week on a bearish note due to an increase in stop rates across the on-the-run bonds. The DMO offered ₦300.00 billion but allotted a total of c.₦225.72 billion across the three tenors. The stop rates for the 2029, 2031, and 2033 papers closed higher compared to the previous auction at 19.89% (+0.25%), 21.00% (+0.81%), and 21.98% (+0.48%), respectively. As a result, the average mid-yield rose by 26 bps to 19.56% week-on-week.

Macro Economic Variables

Key Economic Variables

Securities Recommendations: