23 July 2018 ( Lagos )
Global Economy
U.S. retail sales grew by 0.5% MoM in June, rising for the fifth consecutive month (vs. 1.3% MoM in May). The growth in retail sales was boosted by higher motor vehicle sales during the period. Also, the reported number solidifies the view of improved consumer spending and guides towards robust economic growth over Q2 2018.
Over in Asia, China reported an economic growth of 6.7% YoY for Q2 18, slightly lower than the prior quarter of 6.8%. Elsewhere, U.K inflation figures for the month of June came in below expectations, printing at 2.4% YoY and unchanged from prior month. Further in the region, retail sales dropped 0.5% over the month of June while core retail sales (which excludes auto motor fuel sales) dropped 0.6% MoM.
Domestic Economy
According to media sources, the CBN commenced auction of the Chinese Yuan, recording its first sale on Friday. This is coming following the agreement signed with China on a Naira- yuan currency swap worth $2.4 billion earlier in May. The facility which is valid for three years is aimed at facilitating trade and direct investment between China and Nigeria as well as minimizing exchange risk in both countries.
While the result of the auction has not been communicated, analysts reiterate that the size of the deal – valid for three years – relative to Nigeria imports from China of $6.1 billion in FY 17 (FY 16: $6.9 billion) is a drop in the ocean and thus, do not see any significant relief on dollar demand for China imports.
Equities
The Nigerian equity market traded bearish last week, posting losses for 4 out of the 5 trading days. The market ended the week 2.11% lower WoW, making it the third consecutive week of decline. The decline was largely due to negative performances in First Bank (-12.98%), Guaranty Bank (-4.88%), Zenith Bank (-4.17%), Lafarge (-13.33%), Nestle (-6.35%), PZ (-11.58%) and Okomu Oil (-9.78%).
Dissecting the performance on a sectorial basis, all sectors closed in the red save the Cement sector with Construction (-6.19%), Banking (- 4.73%) and Food (-4.44%) sectors leading the decliners.
Fixed Income
Yields in the Nigerian fixed income market dipped 17bps WoW to 13.05% following buy sentiment at the short end of the curve. To buttress, despite OMO sales of N496.25 billion, massive market liquidity stemming from several coupon payments on FGN bonds in the week, and absence of OMO sales for most part of the week spurred buying sentiment at the short end of the curve.
Consequently, treasury bill yields plunged 38bps WoW to 12.21%. At the long end of the curve, the release of the Q3 bond calendar (N270 billion), which points to higher FG borrowings, stocked sell pressures at the bond market and pushed average bond yields slightly higher by 5bps WoW 13.9%.
Reporting for EasyKobo on Monday, 23 July 2018 in Lagos, Nigeria
Source: ARM Securities Limited
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