Key events on the Global Scene:
US Fed’s Dovish Stance spurs rally …
US Federal Reserve reduced its benchmark interest rate for the first time in four years, lowering it from 5.25%–5.50% to 4.75%–5.00%. The move reflects softer inflation, which dropped to 2.50% in August (vs 2.90% in July and 3.70% in August 2023), along with increased confidence in meeting employment targets. Looking ahead, while the rate cut is expected to stimulate economic activity and drive demand, we anticipate that the Fed will remain vigilant, closely monitoring labour market dynamics, inflationary pressures, global developments, and potential risks that could contribute to persistent inflation. Wall street rallied as NASDAQ and S&P 500 rose at 1.4% and 1.2%, respectively.
Key events on the Domestic Scene:
Nigeria’s headline inflation dropped to its lowest level in six months, increasing by 32.15% y/y, which matched the median estimates. This was a decrease from 33.40% y/y in July, according to data from the National Bureau of Statistics (NBS). Food inflation also decreased to 37.52% y/y, down from 39.53% in July, while core inflation, which excludes volatile food and energy items, increased to 27.58% in August, up from 27.47% in July. On a monthly basis, headline inflation moderated to 2.22% from 2.28% in July. Food inflation also saw a slight decline, with an increase of 2.37% in August compared to 2.47% in July. However, core inflation continued to rise, reaching 2.27% in August, up from 2.16% in July.
The Treasury bill market market showed mixed to bearish sentiments due to tight system liquidity. Most of the trading activity focused on medium- and long-term papers. Towards the end of the week, there were few buying interests on September papers ahead of next week’s auction. Overall, the average mid-rate across the benchmark NTB papers increased by 13 bps week-on-week, reaching 19.43%.
The NGX bourse bullish sentiment dominated the local bourse, with gains recorded in the week. Strong demand for key stocks such as GEREGU (+15.00% WoW), MTNN (+3.95% WoW), and FIDELITYBK (+24.20% WoW) supported the market’s positive performance. Consequently, the All-Share Index appreciated by 81 bps WoW, closing at 98,247.99, while market capitalization settled at N56.46 trillion. The ASI increased by 25 bps, driven by price gains in MTNN (+4.06%) and FIDELITYBK (+9.68%).
Sectoral performance was largely bullish, with three out of five sectors recording positive returns during the week. The Banking (+1.26% WoW), Insurance (+0.86% WoW), and Oil and Gas (+0.02% WoW) indices appreciated on account of buying interest in FIDELITYBK (+24.20% WoW), AIICO (+6.25% WoW), and JAPAULGOLD (+3.86% WoW), respectively. Conversely, the Consumer Goods (-0.77% WoW) and Industrial Goods (-0.13% WoW) indices depreciated, driven by sell pressures in NNFM (-16.97% WoW) and BERGER (-2.30% WoW), respectively. Strong demand was observed for MANSARD (+7.36%), OANDO (+1.85%), and BERGER (+8.33%), contributing to gains in the Insurance (+2.39%), Oil and Gas (+0.41%), and Industrial Goods (+0.01%) indices, respectively. Conversely, the Banking (-0.61%) and Consumer Goods (-0.38%) indices experienced declines due to profit-taking in FBNH (-9.98%) and FLOURMILL (-9.91%).
Capital Market Review/Outlook (FI and Equities):
The Eurobonds market was bearish at the start of the week. However, after the US headline inflation dropped to 2.5% from 2.9% and oil prices steadily rose, African bonds saw positive movement. Nigeria and Angola bonds both saw their prices increase. As a result, the average mid-yield on the Nigerian curve dropped by 6 bps week-on-week to 9.80%.
The FGN local bond market secondary market for domestic bonds experienced a prevailing bullish sentiment, characterized by robust buying interest in three out of four trading sessions. As a result, the average yield across tenors decreased by 16bps w/w, settling at 18.4%. By tenor, the short-dated bonds attracted the most buying interest, with average yield declining by 33bps. Also, the mid and long-dated bonds saw gains, with average yields dipping by 24bps and 2bps, respectively.
Macro Economic Variables
| Equities | This week | Prior week |
| S&P 500 | 19.79% | 17.95% |
| NGX ASI | +30.71% | +30.30% |
| Fixed Income | ||
| Overnight | 29.69% | 31.73% |
| Open Buy Back | 29.97% | 31.20% |
| 1 year T-bill | 18.40% | 18.40% |
| 5-year bond | 18.15% | 19.58% |
| 10-year bond | 20.30% | 19.70% |
| Currency | ||
| FX Reserves ($’bn) | 36.8 | 36.8 |
| USD/NGN | 1,541.52 | 1,649.76 |
| Crude Oil (N/$) | ||
| Brent | 74.66 | 71.86 |
Key Economic Variables
| CPI (%) YoY | AUG-24 | JULY-24 |
| Headline Inflation | 32.15% | 33.40% |
| GDP (%) YoY | Q2 24 | Q1 23 |
| Real GDP | 3.19% | 2.9% |
| Monetary Policy Rate (%) | 26.75% |
Securities Recommendations:
| Security | Rationale |
| AXA Mansard Money Market Fund | The fund is currently at c.21.72% as at 22nd September, 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 |
