Key events on the Global Scene:
US S&P 500 rallied 0.6% w/w driven by better–than-anticipated Q3 2024 earning of the Online streaming giant…
- The US S&P 500 and tech-heavy NASDAQ indices rallied 0.6% and 0.8% w/w, aided on the one hand by the better-than-anticipated Q3:2024 earnings of the online streaming giant, NETFLIX ($9.8bn vs consensus forecast: $9.2bn), inspired by its record 5.1m additional subscriber gain in the quarter. On the other hand, favourable data on average real wage movement in Q3 (average earnings of full-time workers grew 4.2%, BLS) as against urban inflation rate increase in the period (2.6%), fuelled increased bets on equity assets in the week.
- US retail sales rose 0.4% month-on-month in September versus the 0.3% MoM consensus while the “control group” jumped 0.7% MoM versus the 0.3% market expectation. Unemployment initial claims decreased by 19K from was 241k recorded in the previous week.
Key events on the Domestic Scene:
- Nigeria experienced a significant rise in headline inflation to 32.70% y/y, surpassing the estimated 32.34% and marking the first increase in three months. This figure was higher than the 32.15% y/y recorded in August, according to data from the National Bureau of Statistics (NBS). Furthermore, food inflation also saw an increase to 37.77% y/y, up from 37.52% y/y in August, while core inflation, which excludes volatile food and energy items, moderated to 27.43% y/y in September, compared to 27.58% in August. The recent surge is driven by petrol price hikes, severe flooding impacting agricultural output, and persistent supply chain disruptions. The government’s recent economic reforms, including removing fuel subsidies and foreign exchange restrictions to stimulate growth, have inadvertently exacerbated inflation by increasing the naira’s volatility and the costs of imported goods.
- The Treasury bill market experienced bearish sentiment this week due to a lack of liquidity in the financial system. Most selling interest was focused on short- and medium-dated papers as market participants sought to meet their obligations. Additionally, there was significant activity in the Open Market Operations (OMO) space, with long-dated papers trading around the high 23.00% level. As a result, the average mid-rate across benchmark NTB papers increased by 39 bps week-on-week, reaching 21.53%.
Bullish Outing on the Local Bourse as NGX ASI up 0.09% w/w…
- The NGX bourse All-Share Index advanced by 0.48% WoW to settle at 98,070.28 points. Also, market capitalization increased by N3.3 trillion during the course of the week to close at N59.4 trillion. The market’s performance was predominantly driven by strong demand in TRANSPOWER (+19.29% WoW), DANGSUGAR (+13.06% WoW), and OANDO (+10.00% WoW). Overall, the market’s YtD performance prints at 31.16%.
- Sectoral performance was largely bullish, with three out of five sectors recording positive returns during the week. Consumer Goods (+1.42% WoW), Oil & Gas (+1.08% WoW), and Industrial Goods (+0.04% WoW) indexes recorded positive returns following strong demand in DANGSUGAR (+13.06% WoW), OANDO (+10.00% WoW), and WAPCO (+0.69% WoW), respectively. Conversely, the Insurance (-1.23% WoW) and Banking (-0.51% WoW) indexes closed lower on the back of selloffs in MANSARD (-4.01% WoW) and UBA (-4.15% WoW), respectively.
Capital Market Review/Outlook (FI and Equities):
- The Eurobonds market had a mixed performance this week with sideways interest across Nigeria, Angola, and Egypt papers. Overall, the average mid-yield on the Nigerian bond curve increased by 3bps to 9.33% week-on-week. This week, Emerging market currencies and debt faced challenges from rising U.S. rates and election uncertainties. A key development was the IMF’s potential reduction of penalty fees for distressed nations, which could significantly impact the market. Sovereign defaults are expected to rise, but Ghana’s currency rating improved, and Saudi-Egypt private sector deals lifted sentiment. Angola’s Eurobonds remain appealing amid strong EM ETF inflows.
- The FGN local bond secondary market segment was muted in the early trading days as investors play the “wait and see” card ahead of the September CPI data release. Nonetheless, average yield closed the week higher by 20bps w/w to 19.1%. Across the curve, performance was bearish as the short, mid, and long-dated instruments saw yield uptick of 12bps, 22bps and 23bps respectively. Consequently, average yields expanded by 5bps to close at 19.30%.
Macro Economic Variables
| Equities | This week | Prior week |
| S&P 500 | 21.91% | 20.75% |
| NGX ASI | +30.54% | +31.7% |
| Fixed Income | ||
| Overnight | 33.00% | 30.00% |
| Open Buy Back | 32.36% | 29.97% |
| 1 year T-bill | 19.27% | 29.97% |
| 5-year bond | 19.48% | 18.15% |
| 10-year bond | 20.20% | 20.30% |
| Currency | ||
| FX Reserves ($’bn) | 38.83 | 36.8 |
| USD/NGN | 1,659.69 | 1,641.27 |
| Crude Oil (N/$) | ||
| Brent | 73.82 | 74.66 |
Key Economic Variables
| CPI (%) YoY | SEP-24 | AUG-24 |
| Headline Inflation | 32.70% | 32.15% |
| GDP (%) YoY | Q2 24 | Q1 24 |
| Real GDP | 3.19% | 2.9% |
| Monetary Policy Rate (%) | 27.25% |
Securities Recommendations:
| Security | Rationale |
| AXA Mansard Money Market Fund | The fund is currently at c.18.98% as at 13th October, 2024. |
| Dollar Denominated Fixed Deposit | Protects the investor from devaluation of the Naira and exchange rate risk with a return of c.4% – 6%p.a |
| Fixed Income Opportunities | Take advantage of our Naira fixed deposits with fixed rates from 20.65% to 23.80%p.a |
