It appears that consumers’ and investors’ confidence are gradually been restored across major markets across the globe. Below are the performances of global markets:
Macro Update
In a stunning turn of events, the U.S, largest economy, added jobs in May after a record-high number, the previous month. The jobless rate fell to 13.3% from 14.7% in April.
In addition, there have been surveys indicating that consumer confidence, manufacturing and services industries were stabilizing.
Despite last May’s surprise increase, payrolls are nearly 20 million below their pre-COVID-19 level. However, this could indicate that the post-pandemic recovery may not be as drawn out as feared.
Following over 2-months of lockdown as a result of the pandemic, the Federal Government released guidelines of the second phase of the lockdown easing.
The second phase of the lockdown easing is to last 4 weeks spanning from June 2nd – June 29th and will see airlines begin operating from June 21. While the curfew is still in effect, it has been relaxed and is now in effect from 10 p.m. to 4 a.m.
In what appears to be a bid to address the revenue situation that plagues the country as a result of the pandemic, the country has launched its first licensing round for marginal oilfields in nearly 20 years.
Marginal fields are smaller oil blocks that are typically developed by indigenous companies. The Federal Government revoked the existing licenses on the fields so that they could be put into the new licensing round; additionally, judges in Lagos have blocked the government’s efforts to revoke two existing oilfield licenses.
In a recently concluded OPEC+ meeting, the bloc agreed to extend the supply cut by an additional month, bringing the total length of the cuts to 4 months.
It appears the cuts have brought some stability to the oil markets as oil prices gained 48% during its first month. As at print time, oil finally crossed the $40/bbl point ($40.08/bbl) for the first time since March.
Money Markets
Funding rates expanded significantly last week on the back of the c.N600 billion retail FX funding and CRR Debit.
OBB and Overnight rates rose by 1340 bps and 1380 bps to close the week at 15.60% and 16.70% from 2.20% and 2.90% respectively w/w. Market liquidity is estimated to be c.N150 billion according to market sources.
Experts expect funding rates to hover around current levels next week barring any significant flows.
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Treasury Bills
The Treasury Bills market started the week on a relatively quiet note with minimal activity witnessed across board due to the unattractive NTB yields. Hence, activity in the space maintained its relatively weak trend for the rest of the week on the back of the limited market supply.
According to experts in Commercio Partner, a similar trend in the Treasury Bills market is expected next week as attention skews towards the PMA.
Bond Market
The Bond market started the week on a relatively quiet note with minimal volumes seen across as most of the attention was skewed towards the Sukuk bond offering.
Nevertheless, activity began to improve slightly throughout the week as liquidity continues to spur a bullish bias in the market. In all yields decline by 9 bps w/w.
FX Market
Nigeria’s FX reserve declined by 0.54%, USD$17.09 million WoW to $USD36.58 billion, its first decline in weeks. Consequently, the naira depreciated against the US Dollars, pared by 0.04% week-on-week to $1/₦386.50 at the I&E window.
At the parallel market, the currency depreciated against the US Dollars, Pound Sterling & the Euro to $1/₦460, £1/₦545 & €1/₦472 from $1/₦450, £1/₦540 & €1/₦470, respectively in the previous week.
READ ALSO: Pension Fund Managers dump Nigerian Treasury Bills
Equities Market
Last week the benchmark index declined by 0.98% to 25,020.72 points. Featuring on the gainers’ chart for the week are SKYAVN (+50.83%), JAPAULOIL (+50.00%), UAC-PROP (+20.00%) and ABCTRANS (+17.14%).
On the other hand, AFROMEDIA (-23.08%), UACN (-13.89%), FIDSON (-12.94%), PZ (-12.73%), and CADBURY (-11.56%) were listed on the laggard’s chart for the week.
The Exchange witnessed 3 sessions of gains in all the trading session for the week. Hence, YTD return came in at -6.79% from -5.86% in the previous week.
Market Capitalization settled at NGN13.05 billion. The equity market breadth closed negative at 0.67x (compared to 1.55x recorded last week) as the market recorded thirty-nine (39) advancers in contrast to twenty-six (26) decliners in the week.
In the coming week, the experts expect to see continued profit-taking activities on the exchange.
The market is still very volatile. New information into the market will push investors from equity to Bond market vice versa. Any long term speculation on forex market should consider the United States of America election in November not only for Naira/$ transactions but also for the cross rates. However as Nigeria continue to access foreign loans it should have positive impact on the value of the naira in the Fx market.