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
| Equities | This week | Prior week |
|---|---|---|
| S&P 500 | 16.41% | +17.73% |
| NGX ASI | +34.46% | +33.30% |
| Fixed Income | ||
| Overnight | 32.02% | 32.45% |
| Open Buy Back | 31.39% | 31.61% |
| 1 year T-bill | 21.16% | 21.16% |
| 5-year bond | 19.64% | 19.62% |
| 10-year bond | 18.02% | 18.01% |
| Currency | ||
| FX Reserves ($’bn) | 34.66 | 34.66 |
| USD/NGN | 1,596.92 | 1,563.80 |
| Crude Oil (N/$) | ||
| Brent | 84.54 | 85.37 |
Key Economic Variables
| CPI (%) YoY | JUN-24 | MAY-24 |
| Headline Inflation | 34.19% | 33.95% |
| GDP (%) YoY | Q1 24 | Q4 24 |
| Real GDP | 2.9% | 3.46% |
| Monetary Policy Rate (%) | 26.25% |
Securities Recommendations:
| Security | Rationale |
| AXA Mansard Money Market Fund | The fund is currently at c.19.76% as at 21st July, 2024. |
| Dollar Denominated Fixed Deposit | Protects the investor from devaluation of the Naira and exchange rate risk with a return of c.4% – 5%p.a |
| Fixed Income Opportunities | Take advantage of our Naira fixed deposits with fixed rates from 18.90% – 23.4%p.a |
| Fidson Series 11 Commercial Paper | This commercial paper offers an attractive yield of 22.90% p.a., providing a strong return for short-term investments. This offer closes 22nd July, 2024 |
