Key events on the Global Scene:
US Stocks closed higher as Initial Jobless claims falls, Easing Labour market concerns.
In the US, the latest CPI report revealed that inflation moderated to 2.9% y/y in July, the lowest since March 2021, bolstering expectations that the FED might cut interest rates in September. The anticipation of lower interest rates coupled with a resurgence in consumer confidence from strong retail sales data and upbeat earnings reports from major retailers and tech stocks, positively affected market sentiment. As such, the US S&P 500 and NASDAQ indices rose 3.6% and 4.9% w/w respectively. Initial Jobless Claims came in at 227k, shy of the expected 235k, and falling from the prior 234k, as the latest print quelled some fears surrounding the labour market, although the data set can often be choppy, particularly in the Summer months. The print came in alongside a stronger than expected Retail Sales, which also helped ease recent economic concerns and pushed back against expectations for a 50bps rate cut from the Fed in September.
Key events on the Domestic Scene:
Nigeria Inflation declines, the first decline in the headline inflation rate since December 2022
Nigeria’s headline inflation grew at a slower pace of 33.40% y/y in July 2024, down from 34.19% y/y in June, according to data from the National Bureau of Statistics (NBS). Additionally, monthly headline inflation moderated to 2.28% m/m from 2.31% m/m in June. Food inflation also saw a slight decrease, increasing at 2.47% m/m in July, compared to 2.55% m/m in June. However, core inflation rose further to 2.16% m/m in July, up from 2.06% in June. Yearly food inflation eased to 39.53% y/y, down from 40.87% y/y in June, while core inflation, which excludes volatile food and energy items, increased to 27.47% in July, up from 27.40% in June.
The NGX ASI index and market capitalisation fell to 97,100.31 points and ₦55.1tn sequentially, while YTD return dipped to 29.9% (previously 31.9%) representing a 1.5% decrease w/w primarily due to selloffs in BUACEMENT (-14.82% WoW), OANDO (-11.70% WoW) and FBNH (-6.89% WoW).
Topping the gainers, the Oil & Gas index advanced 5.3% w/w spurred by price appreciation in TOTAL (+19.7%) and ETERNA (+11.1%). Following, the Insurance and Consumer Goods indices rose 80bps and 40bps w/w respectively, buoyed by gains in MANSARD (+8.5%), AIICO (+2.8%), NASCON (+11.6%), and DANGSUGAR (+10.8%). On the flip side, the Industrial Goods index led the laggards, down 5.2% w/w following selloffs in CUTIX (-17.5%) and BUACEMENT (-14.8%). Trailing, the Banking and AFR-ICT indices shed 2.3% and 2bps w/w sequentially, following losses in FBNH (-6.9%), ETI (-6.2%), CHAMS (-10.2%), and CWG (-8.7%).
Capital Market Review/Outlook (FI and Equities):
The Eurobonds market was mostly bullish this week, with the average mid-yield falling by 15bps, week-on-week to 10.23%. US inflation (CPI) grew by 0.20% m/m, in line with market forecasts. However, year-on-year inflation grew by 2.90% y/y, lower than the estimated 3.0% y/y. The US Producer Price Index (PPI) increased by 2.20% year-on-year, down from 2.70% year-on-year, and by 0.10% month-on-month, down from 0.20% month-on-month in June.
The FGN local bond market saw bullish sentiment prevail with strong buying interest across the week. Consequently, the average yield across tenors contracted by 37bps w/w to 19.5%. The short-dated bonds attracted the most buying interest, with average yield declining by 55bps, driven by demand for the APRIL 2029 and MAY 2029 papers. Also, the mid and long-dated bonds saw gains, with average yields dipping by 50bps and 20bps, respectively
The DMO held an investor roadshow for the planned FG’s debut domestic-issued FCY bond worth $500.0m as part of efforts to shore up fiscal capacity. The team hinted that total issuance could expand to $2.0bn should the initial offer ($500.0m) be met with healthy demand beginning from next Monday. Additionally, the instrument would be listed on both the NGX and FMDQ platforms to enhance liquidity and accessibility while also appealing to a diverse investor base.
Macro Economic Variables
| Equities | This week | Prior week |
| S&P 500 | 16.45% | 14.50% |
| NGX ASI | +33% | +34% |
| Fixed Income | ||
| Overnight | 33.0% | 34.0% |
| Open Buy Back | 32.3% | 33.4% |
| 1 year T-bill | 20.91% | 21.41% |
| 5-year bond | 20.01% | 19.66% |
| 10-year bond | 18.51% | 18.03% |
| Currency | ||
| FX Reserves ($’bn) | 34.66 | 34.66 |
| USD/NGN | 1,603.80 | 1,603.80 |
| Crude Oil (N/$) | ||
| Brent | 81.99 | 81.99 |
Key Economic Variables
| CPI (%) YoY | JULY-24 | JUNE-24 |
| Headline Inflation | 33.40% | 34.19% |
| GDP (%) YoY | Q1 24 | Q4 23 |
| 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.21.04% as at 18th August, 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 |
