Macro-economic update of week of 05 November 2018   

Global Economy


06 November 2018 : U.S trade deficit expanded slightly by 130bps (vs 650bps in August) to $54 billion in September, albeit at a slower pace driven by a rebound in exports. For clarity, exports expanded by 149bps MoM to $212.6 billion outpacing the impact of a growth in imports (+146bps MoM to $266.6 billion). Elsewhere, preliminary estimate of GDP in the Eurozone reveals a slowdown in the growth rate to 1.7% YoY in Q3 (Q2 18: 2.2%). For us, we perceive the slowdown in growth stems from Italy and the U.K Brexit related issues. Also, the bank of England left its interest rate unchanged at 0.75%, however it signalled the possibility of a hike in its monetary policy stance over the next three years in other to drive inflation down to its 2% target rate.


Domestic Economy


The CBN released a draft economic report for first half of 2018 which showed the state of the economy between January - June 2018. Importantly, the report showed FG fiscal deficit of N786.8 billion (15% lower than H1 2017) relative to budgeted fiscal deficit of N977.2 over the same period. The lower deficit compared to the budget reflected a lower expenditure outlay over H1 18 (-46% to N2.6 trillion) due to slow pace of capital releases as the passage of the budget was delayed. Also, the FG recorded a revenue shortfall of (-52.9% to N1.8 trillion) due to drop in both oil revenue – a fall out of lower oil production (1.9mbpd compared to budgeted 2.3mbpd) and export over –, and non-oil revenue.


Equities


The Nigerian equity market reversed the positive trend witnessed over the past two weeks, declining by 2.38% WoW. The negative performance was driven by declines in FBNH (- 15.0%), ETI (-4.48%), GUINNESS (-5.2%), DANGSUGAR (-10.9%), DANGCEM (-2.9%), NESTLE (-1.5%) and SEPLAT (-3.1%). The stocks that recorded the highest declines during the week were UNITYBNK (-21%), DANGFLOUR (-21.1%), CCNN (-18.8%) and DIAMONDBNK (-16.7%). On a sectorial basis, all sectors closed in the negative territory except the Construction and Real Estate which closed flat. The Brewers (-4.7%), Cement (-3.1%), Personal Care (-5.1%) and Food (-3.3%) were the largest losers.


Fixed Income


Average yields in the fixed income market dipped 6bps WoW to 14.6%. The plunge in yields was largely driven by demand at the short end of the curve which came in despite higher stop rates at this week’s NTB, with average NTB rates 59bps (12.96%) higher than the last auction. However, following sell off at the long end of the curve average bond yields rose 19bps WoW to 15.26% to moderate the plunge at the short end of the curve.


Reporting for EasyKobo on Tuesday , 06 November 2018 in Lagos, Nigeria


Source: ARM Securities Limited


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