FREE

The Market Today - 21 March 2019

U.S. Fed dims outlook, predicts no rate increase this year                                               

The Federal Reserve yesterday announced that the U.S. economy is experiencing slower than expected growth, leaving interest rates unchanged and signaling no expectations of any hikes this year. The Fed chairman, Jerome Powell said that while the American economy is in a good place, growth had slowed under the weight of the U.S.-China trade war and economic slowdowns in Europe and China. The Fed now expects U.S. economic growth of 2.1% in 2019 (previous estimate: 2.3%), with a more bearish 1.9% growth forecast in 2020. The HOLD decision delivered at yesterday’s meeting could induce the return of international investors to emerging markets such as Nigeria, as many had earlier pulled out to take advantage of higher rates in safer U.S. bonds. Analyst expectations of at least three rate hikes this year had implied foreign investors were likely to remain averse to the Nigerian Bond market through 2019. However, the change in stance from the U.S. Fed is likely to spur even stronger activity in the Nigerian Bond market.                                      

Consumer Goods stocks drag market performance                                               

The NSE ASI continued its negative trend yesterday, recording a 13bps loss after three of the four key sectors closed down. Market breadth remained negative with 15 advances to 23 declines. We foresee a mild slump in the ASI today as the bears retain grip on the equities market.                                         

Stock Watch: Following the final approval from the CBN and SEC, and the court sanction obtained yesterday, the merger between ACCESS and DIAMONDBNK has been completed. Consequently, the DIAMONDBNK has been placed on full suspension at a close price of ₦2.42, while ACCESS gained 924bps yesterday to settle at ₦6.50.                                   

PMA rates moderate further                                                

The CBN conducted a Primary Market Auction yesterday, selling its full offer of ₦49 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 10.3000%, 12.2000% and 12.3450% respectively (effective yield: 10.57%, 12.99% and 14.08%) – all lower than the previous PMA rates. Meanwhile, the Interbank Call rate declined 183bps to settle at 10.17%. With ₦121 billion hitting the system today via an OMO maturity, we expect an OMO auction today, with the CBN offering two maturities at slightly lower stop rates. However, we expect a quiet trading session in the secondary market.