22 October 2018

Global Economy 

In the United States, retails sales in the month of September rose modestly by 0.1% MoM (vs. 0.1% in August), as a rebound in motor vehicles was offset by a drop in spending at restaurants (-1.8% MoM) and gasoline (-0.8% MoM). Despite the headline reading, core retail sales (which corresponds mostly with the consumer spending component of GDP) rose 0.5%, matching analyst expectation of 0.5% and indicating healthy labour market as well as steady gains in personal income. Elsewhere, U.K’s inflation rate for the month of September moderated to 2.4% YoY (August 2.7%), largely driven by lower prices on food & non-alcoholic beverage and transport – offsetting higher electricity and gas prices seen in the period. Over in China, economic growth for Q3 18 slowed to 6.5% YoY (Q2 18: 6.7%), dragged by weak factory output as automobiles makers cut their production by over 10% due to a slowdown in demand. For context, the country’s industrial production slowed to 5.8% YoY in the month of September (August: 6.1% YoY) -  a trend which started since April.  

Domestic Economy

Inflation numbers for the month of September printed at 11.28% ,6bps higher than 11.23% in the prior month, stemming from an increase in food inflation as core inflation declined over the period to 9.84% (-18bps). On a MoM basis, headline inflation fell to 0.84% driven by a moderation in both core and food inflation – a reflection of the early peak harvest season and declines in imported and processed food inflation. Also, average energy prices increased for the month of September with diesel and petrol prices expanding by 1.8% and 0.3% to N 212 and N 147 per litre respectively.

Nigerian Equities

The Nigerian equity market closed the week on a positive note, with the NSE ASI appreciating by 1.19% WoW to close at 32,841.69 index points. The bullish performance majorly reflected gains in DANGCEM (+5%). Asides DANGCEM, were gains in ZENITHBANK (+3.15%), GUARANTY (+0.82%), UBA (+0.62%) and NB (+0.57%). On a sectorial basis,  the cement sector (+4.39%, banking (+0.76%), brewers (+0.55) Insurance (+0.28%) and oil & gas (+0.6%) closed positive. On the other hand, the Personal Care (-0.39%), Brewers (-1.73%), Food (-1.74%), Construction (-5.80%) and Real Estate (-0.31%) sectors booked losses

Nigerian Fixed Income

Average yields in the fixed income market was higher WoW by 26bps to 14.54%. This was largely driven by increased sell offs at both ends of the curve, pressured by a squeeze in system liquidity following CBN’s OMO sale in the week. CBN sold N275 billion worth of OMO bills for the 105-day, 182-day and 329-day Paper at 11.25%, 12.75% and 14.00% respectively. Furthermore, FG borrowed N148 billion at this week T-bills auction at stop rates of 10.96% for the 91-day, 12.69% for the 182-day and 13.45% for the 364-day bills. Overall average T-bills and Bond yields rose 38bps and 14bps WoW to 14.08% to 15.00% respectively.   

Reporting for EasyKobo on Monday ,22 October 2018 in Lagos, Nigeria

Source: ARM Securities Limited

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