Macro-economic wrap-up of week of 24th Sep '18   


02 October 2018 


Global Economy 

 

In the United States, the Federal Reserve maintained its tightening stance as it lifted the benchmark policy rate a quarter point to 2.0 – 2.25 percent – the eighth hike since December 2015. The increase in the policy rate was attributed to rising inflationary pressures, strong labor market and solid consumer spending. On consumer spending, US personal consumption expenditure (PCE) price index in August rose 0.1% MoM, maintaining the same pace in July. Elsewhere, US trade deficit in August was up $3.8 billion MoM to $75 billion as imports of goods rose faster than exports. Over in Japan, unemployment rate for the month of August came in below expectation at 2.4% (vs. 2.5% in July). Also, Japan’s annual CPI in August accelerated slightly to 1.3% YoY (July: 1.2%), on the back of higher fresh food prices and holiday-impacted accommodation costs.


Domestic Economy


The Monetary Policy Committee (MPC) of the CBN met over the week leaving all policy parameters unchanged. The committee decided by a vote of seven (7) members to retain the MPR at 14%. However, three out of these 7 members voted to hike the Cash Reserve Requirement (CRR) by 150bps. The other three members voted to tighten by raising the MPR by 25bps with the combined decisions by the committee resonating a more hawkish tone. The MPC projects the economy to grow by 1.75% in 2018 on the back of continued stability in the FX market, higher oil price & crude production and improved electricity supply. In other news, recent data by the NBS showed total FAAC shared by the FG and state governments in the first 7 months of the year increased 39% to N4.8 trillion over the same period last year. The increase largely reflected an improved oil revenue picture mirroring higher oil price and crude production.


Equities


The Nigerian equity market extended gains for the second consecutive week with the NSEASI gaining 70bps WoW to close at 32,766 pts. The positive performance largely mirrored gains in banking stocks - STANBIC (+9.52%), GUARANTY (+5.33%), UBA (+5%), ZENITHBANK (+3.37%). An overview of the sectorial performance showed that Banking (+3.65%), Personal Care (+1.81%) and Real Estate (+0.7%) sectors closed in the positive region while Oil & Gas (-2.69%), Construction (-2.64%), Brewers (-1.95%), Food (-0.56%), and Cement (-0.14%) sectors closed in the red.


Fixed Income


Average yields in the Nigerian fixed income market rose slightly by 5bps WoW to 14.44% on the back of yield elevation at the short end of the curve. The rise in yields at the short end mirrored selloffs following the hawkish tone struck by the Monetary policy committee at this week’s MPC meeting. Consequently, average T-bill yields rose 19bps WoW to 13.94%, offsetting slight moderation at the long end of the curve – buy sentiment across the long end of the curve drove a 10bps plunge in Bond yields.


Reporting for EasyKobo on Tuesday , 02 Octber 2018 in Lagos, Nigeria


Source: ARM Securities Limited


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