Key events on the Global Scene:
- US Inflation prints for January represented the fastest rise in consumer prices in three months, rising by 0.5% as against a rise of 0.1% in December. Resultantly, prices rose 6.4% (YoY). Core CPI increased 0.4% MOM and 5.6% y/y. On the back of this, the 10-year Treasury yield closed at 3.88%, a new high for 2023.
- UK consumer price inflation fell from 10.5% in December to 10.1% in January, which was less than forecast. According to data from the Office for National Statistics, the core CPI, decreased by 0.5% MOM. On the back of this, The UK 10-year yield hit a high of 3.50% to close the week.
- ECB President reiterated that the European Central Bank intends to raise borrowing costs by another 50bps in its upcoming March meeting. Accordingly, her comments and the growing possibility of a more hawkish stance from the Fed drove bonds to hit an 11-year high, with the 10yr bond yield closing at 2.48%.
Key events on the Domestic Scene:
- Nigeria’s January 2023 inflation rate increased slightly to 21.82% Y/Y (Est. +21.30%), an increase of 0.48% from the 21.34% Y/Y recorded in December 2022. Also, compared to the 1.71% reported in December 2022, headline inflation increased by 1.87% m/m in January 2023. Core inflation increased to 19.16% in January from 18.49% in December 2022, while food inflation increased to 24.32% from 23.75% in December 2022. Major drivers remain the same as cost of doing business, exchange rate pressures and persistent fuel scarcity continues to plague the economy.
Capital Market Review/Outlook (FI and Equities):
- The bears sealed the week’s trading activity at the equity market, as the ASI declined by 0.96 w/w to close the week with a YTD return of 4.98%. The bearish tone was driven by sell activities on market leaders like GTCO (- 0.05%), ZENITHBANK (-0.50%), and ACCESSCORP (-0.05).
- The bond secondary market ended the week on bearish sentiments with trickles of offers on short to long dated maturities. Overall, minimal volumes were executed across the curve. The average benchmark rate rose marginally by 1bps as at COB on Friday.
- The SSA Eurobonds market closed the week with bearish sentiments as risk on sentiment continues on the back of expected increase in interest rates. Fed reserve officials said the economic case shows the need to keep increasing interest rates. The Nigerian Eurobond average yield rose by 12bps.
Macro Economic Variables
| Equities | This week | Prior week |
|---|---|---|
| S&P 500 | -19.33% | 6.29% |
| NGX ASI | 16.36% | 5.78% |
| Fixed Income | ||
| Overnight | 17.81% | 16.25% |
| Open Buy Back | 17.13% | 15.38% |
| 1 year T-bill | 2.24% | 3.74% |
| 5-year bond | 14.11% | 13.41% |
| 10-year bond | 15.94% | 14.90% |
| Currency | ||
| FX Reserves ($’bn) | 36.79 | 36.95 |
| USD/NGN | 461.25 | 461.50 |
| Crude Oil (N/$) | ||
| Brent | 83.97 | 86.37 |
Key Economic Variables
| CPI (%) YoY | DEC-22 | NOV-22 |
| Headline Inflation | 21.34% | 21.47% |
| GDP (%) YoY | Q3 22 | Q2 22 |
| Real GDP | 2.25% | 3.54% |
| Monetary Policy Rate (%) | 17.50% |
Securities Recommendations:
| Security | Rationale |
| AXA Mansard Money Market Fund | The fund is currently at c.11.32% levels which is higher than the present offerings from top tier commercial banks. This enables clients to maximise their funds in the short term, while also positioning their portfolio to benefit from any spike in yields. |
| USD FD | Protects the investor from devaluation of the Naira and exchange rate risk, with a return of c.5% p.a |
| Tenured Deposit | ARM at 14.10%p.a(Net) |
