This past week saw the equities market extend losses, as weak sentiment drove sell-offs across sectors. Earnings scorecards were broadly unimpressive for key names that released 9M results as macro pressure continues to bite.
As such, at 27,294.2 points, the ASI closed the week 1.1% lower from the previous week, with YTD return moving further south to -4.7%. System liquidity was moderately robust at the start of the week, opening at N151.5bn long. However, in anticipation of FAAC inflows worth c.202.0bn, the CBN was aggressive in its pace of OMO auctions, selling a total of c.N361.3bn via daily OMO sales.
This moderated liquidity significantly, and ensured key money market rates ended the week higher in the course of the week. Towards the end of the week however, inflow from maturing bills worth c.144.9bn helped ease liquidity thus moderating rates. The Open Buy Back (OBB) and Overnight (O/N) closed the week at 10.3% and 9.7%, lower than the 14.5% and 14.0% recorded in the previous week respectively.
For equities, we expect sentiment to be mixed this week, albeit with a bearish bias, with Q3 earnings numbers likely to remain the dominant theme that will dictate overall market direction in the interim. Momentum will likely be more towards the bears earlier on in the week at the FI market against a backdrop of tight system liquidity. That said, demand will likely gradually increase, with unallocated funds from FX forward sales re-entering the market even as the institutional players take position ahead of the new month.
Global and Macro-economic market update
Market performance mixed as impressive US Q3 GDP reading sparks rate hike fears
Performance of major US equity indices was mixed in the past week, on a combination of investors’ reaction to raft of earnings numbers as well as preliminary Q3 GDP reading that came in at 2.9%, much in line with consensus estimates and 1.4ppts higher than the previous quarter. While investors first reacted positively to impressive to the GDP number, the bears emerged at the forefront towards the end of the week, as fears of impending rate hike by the FOMC gripped markets, with probability of December rate hike rising to 83.0%. On a weekly basis, the S&P lost 0.7% while the Nasdaq fell 1.3%. The Dow managed to eke out a weekly gain, up by less than 0.1%.
European equities closed mostly lower in the past week, owing to a round of downbeat financial updates, with brewing giant Anheuser-Busch InBev NV among companies that disappointed. On the data front, economic numbers was more mixed. While inflation remained unchanged for the second month in a row, Q3 GDP figures for France came in at 0.2%, 10bps behind consensus. However, German inflation rose to the highest level in two years in October, with consumer prices rising 0.2% on the month and 0.7% on the year. In all, the The Stoxx Europe 600 index was down by 1.0% on a w/w basis.
Equity performance in Asia was mostly mixed, with the Japanese Nikkei the major outperformer despite disappointing data which showed its core CPI fell 0.5% in September, creating a somber picture for the country’s inflation outlook regardless of on-going QE.
On the domestic scene, the World Bank in its latest Ease of doing business index for 2017 has ranked Nigeria 169 out of 190 countries in its coverage basket, one spot higher than previously. The report released showed that most improvement came in the area of access to credit, where the country moved up by 16 places.
Domestic Financial Markets Review and Outlook
Equities: ASI extend losses as Investors lock-in gains
This past week saw the equities market extend losses, as weak sentiments drove sell-offs across sectors. As such, at 27,294.2 points, the ASI closed the week 1.1% lower from the previous week, with YTD return moving further south to -4.7%. A closer look at the sectoral performance revealed that sentiment was mixed. Specifically, the Industrial Goods sector top the gainers’ chart posting +2.7% w/w, just as the Consumer Goods and the Oil and Gas sectors posted a positive weekly return of +0.3% apiece. Example of counters that drove positive momentum in these sectors include WAPCO (+16.2%), TOTAL (+13.8%), UNILEVER (+8.9%), ETI (+3.7%) and CADBURY (+3.6%).
On the flip side, the Banking sector was down 0.4% w/w just as the Insurance index closed the week lower with a loss of 0.3%. Stocks that drove negative momentum in these sectors include SKYEBANK (-7.8%), STERLINGBANK (-7.1%), WEMA (-6.2%) and DIAMOND (-6.0%). When compared to the previous week, overall market sentiment worsened with market breadth settling at 0.5x (relative to 0.4x in the previous week) as 21 stocks appreciated against 41 decliners. However, activity level during the week improved as the average value inched higher by 64.6% w/w to N864.8m, just as the average volume traded surged by 109.3% w/w to 109.7m units reflective of a low base.
