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Global Financial Market Summary For 9th March 2020

The Nigeria’s local bourse began on Monday morning on a bearish note amid a slump in crude prices, which fell over ▼10% , as Brent oil was trading below $35 causing a shortfall in revenue to Nigeria’s 2020 budget,

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Global stocks tumble on "corona" sell off, BLOODY WEEKS: Coronavirus cost investors N1 trillion, triggers devaluation fears, Global Market Summary on Tuesday, Analysis: The economy is crashing, avoid falling knives,, Debt crisis looms in emerging markets,Debt crisis looms in emerging markets

The Nigeria’s local bourse began on Monday morning on a bearish note amid a slump in crude prices, which fell over 10% , as Brent oil was trading below $35 causing a shortfall in revenue to Nigeria’s 2020 budget, as crude oil is trading far below its official benchmark pegged at $57 per barrel.

This is compounding Nigeria’s fiscal woes with a deficit of more than $54 million dollars daily, coupled with continuous threat to the global economy posed by an increase in Coronavirus attacks across the world.

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Nigeria’s ASI index lost over N220billion. The value of listed stocks decreased to N13.474trillion from an open level of N13.694trillion down ▼ 2.39%

In Asia’s trading session, the Japanese stock index, Nikkei 225 fell to 14-month lows on Monday, on rising fears that the widening reach of the coronavirus outbreak could severely disrupt the global economy. The Nikkei 225 index lost about -5.1% to ▼19,473.07, its lowest closing level since January,2019. It recorded the biggest one-day fall since June 2016.

READ ALSO: Stocks close February in deep red as investment options dry up for Nigerians

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The European stock index recorded a heavy drop on Monday falling 7%, with the benchmark STOXX 50 entering a bearish territory, as fears of a global recession was heightened by a huge drop in oil prices and the Italian coronavirus siege, it closed at ▼2,991.42, after losing about 239.31 points

The British commodity-dominated FTSE 100 index fell more than 6% caused by two major oil players, British Petroleum and Royal Dutch Shell both plummeting about 20% of their stock price and set for their worst day ever. The FTSE 100 index closed at 6,010.42 at 2pm Nigerian local time.

At the American trading session the Dow 30 index clawed back some gains, but the dampened global outlook continued to cloud over stocks amid a historic fall in crude oil prices after Saudi Arabia launched a price battle against the Russians and spread of the new coronavirus continued to dent investor sentiment.

The Dow Jones Index fell 1,373 or 5.29%, but was down more than 2,000 points at lows, the S&P fell 5.15%, after trading was paused just after the open following a 7% slump. The Nasdaq 100 index fell more than 5% trading at 8,057.75 at 6.36pm Nigerian local time.

In the commodities market Oil prices lost more than 10% after Saudi Arabia sold its oil at discounted prices, putting crude oil prices on track for its biggest daily slump since the first Gulf War. This is based on failed alliance between Saudi’s led OPEC and the Russians over oil production cut, Brent oil was trading at ▼$35.11 at 2.30pm Nigerian local time.

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READ ALSO: Oil price war threatens Nigeria’s economic stability

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Gold spot prices rose on Monday gained modestly at +0.05%, as a rout in global capital markets on concern over the economic fallout from the coronavirus outbreak lifted investors appetite for safe-haven assets. Gold spot price trading at $1674 per ounce at 6.45pm Nigerian local time. Gold is mostly viewed as a safe haven asset, used to hedge against inflationary prone assets like equities and cash

In the cryptocurrencies market, the bearish trend continued recording a heavy fall in value following a plummet in energy prices and sell-off in global equities

The cryptocurrencies market capitalization was down over $25 billion at 2.30pm Nigerian local time. According to data from Coinmarketcap.com. The bearish trend continued throughout Monday’s trading session.

Bitcoin, the biggest cryptocurrency by value, fell over -10% trading at ▼7842.93 at 2.40pm Nigerian local time. The other popular digital coins such as Ethereum,XRP and bitcoin cash, also recorded a double-digit percentage point losses.

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Olumide Adesina a French-born Nigerian, is an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. Olumide Adesina is a certified Investment trader, with more than 14 years of working experience. His work experience covers trading commodity derivatives and analysis of global equities, currencies, commodities, cryptocurrencies, and Fixed Income instruments. A member of the Chartered Financial Analyst Society. You can follow Olumide on twitter @tokunboadesina and email via olumide.adesina@nairametrics.com.

4 Comments

4 Comments

  1. Chioma Okpagu

    March 10, 2020 at 6:10 am

    Investment Analyst par excellence

  2. Adrian Aibangbee

    March 10, 2020 at 10:23 am

    Very insightful and analytical. Awesome as always…

  3. Owolabi Tosin

    March 10, 2020 at 10:54 am

    Detailed analysis…. Great job!👌

  4. OLUATA Toluwani

    March 10, 2020 at 8:42 pm

    Very incisive and on point .

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Central banks digital currencies pose a threat against the U.S dollar

In general, digital currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows.

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Central banks digital currencies pose a threat against the U.S dollar.

A new report by America’s biggest bank, JP Morgan Chase, said the U.S dollar is being faced with a major threat as many  central banks’ digital currencies continue to gain traction.

Analysts, including Josh Younger, the head of U.S. interest-rate derivatives strategy and Michael Feroli, the chief U.S. economist, wrote in a report saying this:

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“There is no country with more to lose from the disruptive potential of digital currency than the United States.

This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services convey immense advantages.” 

Aditi Kumar and Eric Rosenbach also recently penned an opinion piece for Foreign Affairs in which they noted that “Just recently, America’s arch-rival China became the first major economy to carry a real test of a national digital currency.”

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(READ MORE: Why the strong dollar is giving Nigeria headache)

In general, electronic currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows. A digital Chinese currency (yuan) combined with China’s developed electronic payment systems may give China more future influence than it ever bargained for.  

What Nigerians should know about Digital currencies

A digital currency is a cash balance recorded electronically on a store value card or other physical devices, which could someday replace the physical notes of the naira, for instance.

Digital currencies can be decentralized, that is where the control over the cash supply can come from diverse sources. Digital  currencies can also be centralized, where there is a midway point of control over cash supply, just like the way central banks work.

Central banks digital currencies pose a threat against the U.S dollar.

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Although JP Morgan does not see the U.S dollar being overthrown as the world’s reserve currency anytime soon, experts warned that the U.S dollar dominance could weaken. This is because its processing trade settlement and the SWIFT system could make it more vulnerable.

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The American bank continued by saying:

“Offering a cross-border payment solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy,

“For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management.” 

Federal Reserve Chairman Jerome Powell said months ago that the Federal Reserve was taking a critical view on the issues regarding a digital currency.

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Dollar gains against major currencies

U.S dollar stood firm against major currencies on Monday as fears over rising tensions between America and China over Beijing’s plans to begin

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The US dollar remains king, U.S dollar gains against major currencies, America threatens China with sanctions.

The U.S dollar was up on Monday morning during London’s trading session after protests in Hong Kong yesterday escalated U.S-China tensions.

US dollar stood firm against major currencies on Monday as fears over rising tensions between America and China heightened.

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The American Dollar Index that monitors the U.S dollar against a basket of other major currencies was slightly up 0.02% to 99.945 by 11.10 am Nigerian local time.

What it means: Nigerians hoping to meet a foreign exchange payment obligation, transactions via the dollar to countries like Europe, Japan, would have the need to pay fewer dollars to fulfill such transactions.

(READ MORE:Reports: China may defer loans owed by Nigeria and others)

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Meanwhile, the friendship between the Americans and Chinese has soured lately since the outbreak of the COVID-19 pandemic. US President Trump and President Jinping of China have traded words against each other issues surrounding COVID-19, including accusations of lack of transparency and cover-ups. 

 

American Dollar remains king as stimulus fails to stop global financial market panic,Demand for “Inflow dollars” drive exchange rate to as high as $N420/$1 compared to “Cash dollars”, U.S dollar drops against major currencies, tension rises between America and China, U.S dollar gains against major currencies, America threatens China with sanctions.

Consequently, the U.S. Commerce Department added 33 Chinese businesses to a blacklist on Friday, and some U.S. Senators proposed sanctions on those businesses.

“The biggest concern is the tension between the United States and China, things were already bad, and it is likely to get worse because of the Hong Kong security law. This supports risk-off trades, which is positive for the dollar and the yen,” Tekuya Kanda, the general manager of research at Gaitame.com Research Institute, told Reuters.

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Air Peace to evacuate stranded Indians from Lagos to Kerala

A list of the passengers to be attended to has already been given and the flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.

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Air Peace signs deal with Brazillian aerospace company , Air Peace suspends flight operations over COVID-19

The management of Air Peace Nigeria has been contacted by the Indian High Commission in Nigeria to undertake the evacuation of stranded Indian nationals to Kerala, India. This was disclosed by the airline via its Twitter handle.

The airline explained that a list of passengers that would be attended to have been released and it has started reaching out to the Indians on Saturday.

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It stated, “A list of the passengers to be attended to has already been given to us and we have commenced reaching out to them. The flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.”

The flight is not free anyway. According to the airline, payments are expected immediately and they are Economy is $1.300 and Business class is tag $1,700. “You are equally allowed to pay in Naira at N460/$,” it added.

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However, some Indians in Nigeria has reacted with mixed feelings to the development on Twitter. While some were ready to join the flight back home, others called for the refund of ticket fare booked a week ago.

READ ALSO: Hope rises as Emefiele set to meet MTN, 4 banks today.

For instance, Jayant Khamesra requested for the refund ticket fare of N568, 100, which he paid for a flight from Lagos to Delhi.

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He said, “Please refund ticket fare P47812 LAGOS to DELHI. No show by Air Peace and it is been 1 week now, there has been no refund or confirmation of the same. Reference ALHN79 amount N568,100. I am sure a good world-class carrier like Air Peace won’t delay refunds purposely. Please act fast.

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