Wk2 (October ’24) – Weekly Market Report

Key events on the Global Scene:

Despite being higher than expected, US inflation is at its Lowest since 2021.

• US inflation last month reached its lowest point since February 2021, clearing the way for another Federal Reserve rate cut and adding to the stream of encouraging economic data that has emerged in the final weeks of the presidential campaign. The consumer price index rose 2.4% in September from 12 months earlier, slightly higher than the 2.3% expected, but lower than the 2.5% year-over-year increase in August. A reading that low, likely reflecting lower gas prices and only a slight rise in food costs, barely exceeds the Fed’s 2% inflation target.
  
• Unemployment initial claims was 258k an increase of 33k from the previous week’s unrevised level of 225k. This is the highest level for initial claims since August when it was 258k. This week, performance in the global equities market was majorly positive guided by a flurry of economic data releases, impressive corporate earnings, and expectations of further rate cuts by the Fed. Consequently, the MSCI World Equity index advanced 0.9% w/w. In the US, inflation moderated to 2.4% y/y in September, marking the lowest reading since February 2021 although slightly higher than expectations of 2.3%. Also, sentiment was buoyed by labour data resilience (+254,000 jobs) and impressive Q3 corporate releases, particularly from major banks. As a result, the US S&P 500 and NASDAQ indices inched higher by 0.7% a piece.

Key events on the Domestic Scene:

• At the recently concluded MPC meeting, the committee unanimously voted in favour of a 50bps MPR hike to 27.25%, with asymmetric corridor unchanged at +500/-100. In addition, the Cash Reserve Ratios (CRR) of Deposit Money and Merchant Banks were adjusted higher by 500bps and 400bps to 50.0% and 16.0% accordingly while Liquidity Ratio was kept at 30.0%.
  
• The Treasury bill market was mostly quiet this week, with bearish sentiments due to the liquidity crunch in the interbank market. This week, an NTB auction was conducted, with ₦81.904 being offered and sold, with subscriptions totalling ₦273.278bn. Stop rates were printed at 17.00%, 17.50%, and 19.864% across the 91,182 and 364-day papers, respectively. The CBN also conducted an OMO auction at the end of the week, offering ₦300bn; however, subscription and allotment totalled ₦908.23bn and ₦905.23bn, respectively. Overall, the average mid-rate across benchmark NTB papers increased by 30 bps week-on-week, reaching 21.14%.

Bullish Outing on the Local Bourse as NGX ASI up 0.09% w/w…

• The NGX bourse All-Share Index advances by 0.09% week-on-week buoyed by sustained demand in SEPLAT (+5.09% WoW), alongside renewed interest in FIDELITYBK (+13.08% WoW), and FBNH (+4.00% WoW), the Nigerian equities market closed the week on a positive note. Accordingly, the All-Share Index and market capitalization appreciated by 0.09% WoW to settle at 97,606.63 points and N56.1 trillion, respectively.
  
• Sectoral performance was largely bullish, with three out of five sectors recording positive returns during the week. The Oil & Gas index continues to trend northward, appreciating by 1.57% WoW, driven by sustained demand in SEPLAT (+5.09% WoW). Similarly, the Banking (+0.47% WoW) and Insurance (+0.08% WoW) indices closed higher on the back of buying interest in FIDELITYBK (+13.08% WoW) and MANSARD (+4.17% WoW), respectively. Elsewhere, the Consumer Goods (-1.25% WoW) and Industrial Goods (-0.13% WoW) indexes shed some value during the course of the week, following selloffs in NB (-3.33% WoW) and WAPCO (-2.03% WoW).

Capital Market Review/Outlook (FI and Equities):

• The Eurobonds market had a mixed to bullish performance this week. Initially, African papers showed bullish sentiments, but profit-taking ahead of the release of US Sep CPI data led to a bearish bias. The US CPI data exceeded expectations, with headline inflation at 2.40% y-o-y (Est. 2.30%) and Core inflation at 3.30% (Est. 3.20%), causing a mild bearish bias. However, renewed investor sentiment surfaced towards the close of the week. The major highlight was the issuance of Ecobank Transnational Incorporated (ETI) – 144a/Reg S Us$-Denominated Benchmark 5-Year (2029) Senior Unsecured Notes at a 10.125% yield, which attracted substantial investor demand to conclude the week. Overall, the average mid-yield on the Nigerian bond curve fell by 11bps to 9.30% week-on-week.
  
• The FGN local bond the secondary bond market had a muted outing except for a negative close on Friday, resulting in a 1bp w/w increase in the average yield to 18.9%. Across the curve, short and mid-tenor instruments faced sell pressure, with yields rising by 2bps and 6bps, respectively, while yield on long-dated instruments declined 1bp. This performance is attributed to investors positioning ahead of the upcoming PMA auction

Macro Economic Variables

Key Economic Variables

Securities Recommendations: