July 2024 – WMR

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 0.78% due to selling pressure from political tensions.
  
• US weekly jobless claims jump amid usual seasonal volatility as Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 243,000. Retail sales were flat in June, defying Wall Street’s fears of a decline and showing how the American consumer continues to spend despite signs of slowing in the US economy. Economists had expected a 0.3% decline in spending, according to Bloomberg data. Meanwhile, retail sales in May were revised higher to an increase of 0.3%, from a prior reading of 0.1%. Federal Reserve Chair Jerome Powell said second-quarter economic data has provided policymakers greater confidence that inflation is heading down to the central bank’s 2% goal, possibly paving the way for near-term interest-rate cuts. Powell pointed to the three latest inflation readings — including the one from last week — though made clear he didn’t intend to send any specific message about the timing of rate reductions.

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.
  
• The treasury bills secondary market ended the week on a relatively calm note, albeit bearish, as we saw pockets of offers at the mid to long end of the curve with limited bids to match. We expect a cautious trading environment as market participants anticipate and position for the primary market auctions next week. The CBN’s mid-week OMO auction resulted in a “no sale” outcome, as investor participation was lacklustre, leading to notably low subscription. Consequently, the average mid-rate increased by 86 bps week-on-week to reach 22.70%.

Capital Market Review/Outlook (FI and Equities):

• The Sub-Saharan Africa (SSA) Eurobond market closed the week on a downward trajectory as investors engaged in profit-taking activities. After a period of strong performance driven by favourable global economic conditions and investor appetite for higher-yielding assets, market participants opted to lock in gains, leading to a sell-off in the various sovereign Eurobonds across the curve. We expect next week’s trading activities to be skewed towards fed’s favourite inflation gauge- PCE. Overall, the average mid-yield on Nigerian curve increased by 24bps week-on-week to 9.91%.
  
• The Nigerian bourse market traded bullish as the All-Share Index advanced by 0.87% WoW to close at 100,539.40 points. Market capitalisation added N487.9 billion to settle at N56.93 trillion, the market’s performance was predominantly buoyed by a significant uptick in UCAP (+42.78% WoW), alongside OANDO (11.28% WoW) and AIRTELAFRI (+4.76% WoW). The ASI expanded marginally by 4bps to close at 34.46% on the back of renewed interest in MTNN (+1.99%), masking the selloffs seen in DANGSUGAR (-1.34%) and FBNH (-3.29%).
  
• The Insurance (-4.86% WoW), Consumer Goods (-0.20% WoW), Oil & Gas (-0.10% WoW), and Banking (-0.05% WoW) indices depreciated due to sell pressures in LINKASSURE (-24.56% WoW), DANGSUGAR (-2.76% WoW), JAPAULGOLD (-4.02% WoW), and GTCO (-1.21% WoW), respectively. Conversely, the Industrial Goods index advanced by +0.08% WoW on the back of buying interest in WAPCO (+1.10% WoW).
  
• The local bond market closed the week on a bearish note as we continued to see offers across this curve. We witnessed activities mostly on the 2050, 2031 and 2033 papers. Day-on-day average yield rose by 12bps. Notably, the Mar-2050 paper saw a 67bps expansion in yield to close at 18.18%..

Macro Economic Variables

Key Economic Variables

Securities Recommendations: