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Breakfast Report - 07 May, 2018

The Week Ahead                                                                            

Global oil prices have continued their uptrend in 2018, with West Texas Intermediate (WTI), the North American benchmark, breaking the $70/bbl level for the first time since 2014 (Brent hovering around $75/bbl). Global oil prices have been supported by strong compliance to the OPEC output curb as member countries are estimated to have over-complied again in April. Prices have also been lifted by an increased likelihood that President Trump will reimpose sanctions on Iran once the current deal expires in the middle of May. All this has countered the effect of rising U.S. output as shale producers exploit the highest oil prices since 2014. With the OPEC deal expected to last till at least the end of the year, and geopolitical risks tilted to the downside, we see oil prices holding steady above $70/bbl in the near future. Naturally, this should boost Nigeria’s federal earnings and support foreign exchange liquidity.         

Equity: The Nigerian equity market closed out last week in the green, rising 27bps however posting a 6bps w/w decline. Despite the positive market breadth and green close at the end of last week, we note that market sentiment remains mixed given the even split between sector gainers and losers. We expect this sentiment to persist today even as the last batch of Q1’18 earnings roll in.                                                          

Stock Watch: CILEASING has gained 38% over the last seven sessions. The stock was the biggest gainer for last week following the release of strong Q1’18 results reporting ₦6.5 billion in Revenue and ₦373 million PAT. It currently trades at a price of ₦1.80 and has returned 40% ytd.                                                    

Fixed Income: Whilst we expect healthy system liquidity to support buying today, we note strong sell pressure at the close of last week and expect this to cap buying today.