Macro-economic update of week of 19 November 2018   

Global Economy 


26 November 2018 : Data released by IHS/Markit revealed that Eurozone manufacturing purchasing managers index (PMI) dropped further to 51.5 in November (vs. 52.0 in October) while services PMI edged lower to 53.1 (vs. 53.7 in October), following slowdown in new orders (especially export orders). Elsewhere, Brent crude price extended bearish run this week, touching 2018 low of $59.63/bbl. today (-11% YTD). The ongoing weakness was mainly driven by growing fears that supply overhang could soon return to the market, as the US output levels remain at a record high.


Domestic Economy


Nigeria’s inflation in the month of October further moderated by 11.26%, 2bps lower than 11.28% in the prior month. On a MoM basis, inflation rate fell by 0.74%, as softening food prices hinged on favorable harvest which tamed the impact of an uptick in core prices. Specifically, food prices dipped by 0.82%, 18bps lower than prior month while core inflation ticked up by 0.8% – 16bps higher than prior month. At the MPC meeting concluded during the week, all the 12 committee members elected to leave all parameters unchanged (MPR: 14%, CRR: 22.5% and Asymmetric Corridor: -200bps/+500bps) compared to 7 members at the September meeting. The CBN Governor cited the seasonal nature of the downtrend in the general price level and the fragile economic growth picture as the crux of the committee’s decision.


Equities


The Nigeria equity market closed the week negative, losing -1.18% WoW to close at 31,678.70 points. The bearish performance was driven by sell pressure in DANGCEM (-4.18%), ACCESS (-3.90%) and NB (-1.57%). Breakdown of sectoral performance revealed that the Personal Care (+4.00%), Food (+1.72%), Insurance (+1.05%), Oil & Gas (0.54%), and Real Estate (0.37%) recorded gains during the week, while the Banking ( -0.21%), Brewers (-0.97%), Cement (-4.29), and Construction (2.24%) sectors closed negative.


Fixed Income


Contrary to the bearish run in the fixed income market over the past few weeks, average yields dipped 11bps WoW to 14.92%. This was driven by depression at both ends of the curve as investors reacted to dissipating inflationary pressures (-2bps MoM to 11.26% in October) amidst pent up liquidity in the market (Average system liquidity: +99% WoW to N293 billion) which spurred demand for fixed income instrument. Thus, average NTB and Bond yields dipped 15bps and 7bps WoW to 14.48% and 15.35%.


Reporting for EasyKobo on Monday , 26 November 2018 in Lagos, Nigeria


Source: ARM Securities Limited


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