According to the US Bureau of Economic Analysis, the US real GDP increased at an annual rate of 2.10% in Q2:2023 (vs. 2.20% in Q1:2023) according to its third estimate. Relative to Q1:2023, the slower growth is underpinned by lower consumption expenditure, decline in exports and downturn in government spending. These were partially offset by an uptick in private inventory investment and nonresidential fixed investment. Elsewhere, in the UK, according to the Office of National Statistics, GDP was higher by 0.20% in Q2:2023 (vs. a revised 0.30% in Q1:2023). Growth was largely driven by a 1.20% upsurge in the production sector, where there were increases in nine (9) out of twelve (12) subsectors; reflective of falling input prices across the economy. Finally, according to Eurostat, Euro Area annual inflation is expected to be 4.30% YoY in September 2023 (vs. 5.20% YoY in August 2023). Looking at the main components, food, alcohol & tobacco is expected to have the highest annual rate in the month (8.80% YoY vs. 9.70% YoY in August 2023), followed by services (4.70% YoY, compared with 5.50% YoY in August), non-energy industrial goods (4.2% YoY, relative to 4.70% YoY in August) and energy (-4.70% YoY in comparison to -3.30% YoY in August).
Earlier this week, The Nigerian Senate approved the appointment of Dr. Olayemi Cardoso as the new Governor of the Central Bank of Nigeria (CBN). This decision was made after the Senate screened Cardoso and the four other nominees for the Deputy Governor positions. The four Deputy Governors whose appointments were approved are Emem Usoro, Muhammad Dattijo, Philip Ikeazor, and Bala Bello. Furthermore, the National Economic Council (NEC) confirmed that the Federal Government’s US$3bn emergency loan for crude oil, secured in August 2023, would be utilized to stabilize the Nigerian currency, which has been experiencing fluctuations in the Investors & Exporters’ (I&E) window and a worsening situation in the parallel market, reaching N1000/US$1 during September 2023.
Equities and stock recommendation
The Equities market ended the week bearish, for the third (3rd) consecutive week as the NGX ASI dropped 140bps WoW to 66,382.14 points. The market lost in all four (4) trading days of the week, causing its year-to-date (YtD) returns to decline to 29.52% YtD from 31.36% YtD last week. On a sectoral basis, all sectors under our coverage closed negative except the Consumer Goods (+1.59% WoW) and Insurance (+2.77% WoW) sectors. The Banking (-4.17% WoW), Industrial Goods (-3.04% WoW) and Oil and Gas (-1.24% WoW) sectors all recorded losses. The top gainers for the week include BETAGLAS (+30.4% WoW to NGN60.90), IKEJAHOTEL (+30.0% WoW to NGN3.25) and CWG (+23.6% WoW to NGN8.65). On the other hand, OANDO (-33.8% WoW to NGN7.85), FTNCOCOA (-19.7% WoW to NGN1.51) and SUNUASSUR (-14.3% WoW to NGN0.90) led the decliners’ chart. In the coming week, we expect mixed sentiments in the market as investors continue to partake in profit-taking activities.
At the primary NTB auction held within the week, the average stop rate dipped by 126bps to 7.64% (compared to 8.89% at the previous auction). However, the average bid-to-cover ratio increased by 21bps, to settle at 4.44% (vs. 4.23% at the previous auction), indicating a rise in demand for the instruments. In the secondary market, the Nigerian Treasury Bills closed the week on a bullish note as the average yield declined by 53bps WoW, to close at 7.94%. Similarly, the secondary bond market ended the week positively, with the average yield falling by 2bps WoW, to 14.44%. This was on the back of significant buying interest in the MAR-2024 instrument (–79bps). Overall, the Naira Fixed income market closed the week on a bullish note as the average yield dipped by 28bps, to settle at 11.19%. In the coming week, we expect bullish sentiments to persist in the fixed income market given the recent increase in liquidity.
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