Breakfast Report - 26 November, 2018
The Week Ahead
Brent crude slumped to a 2018 low of $58.80/bbl on Friday amid a sell-off triggered by concerns over excess supply and a weakening global economy. We recall that in October, the Federal Executive Council (FEC) approved a $60/bbl Brent crude benchmark for the 2019 Budget, up from $51/bbl in the 2018 Budget. The Organization for Petroleum Exporting Countries (OPEC) is due to meet before the end of the year to discuss a supply cut to support declining prices, whilst U.S. President Donald Trump has hailed the low price of oil and asked for crude prices to fall “even lower”. Meanwhile, we note that Nigeria’s oil production (2.0 mb/d) remains below the budget benchmark of 2.3 mb/d. All of this could threaten Nigeria’s 2019 oil earnings, which are vital for federal government spending and central bank reserves.
Equity: Trading in the equity market ended on a negative note on Friday, with the ASI recording a 98bps d/d and 118 bps w/w loss. We expect another negative trading session to start this week as investor apathy continues to weigh on market activity.
Stock Watch: ACCESS lost in three out of four sessions last week. The Tier I banking stock lost 199bps on Friday to settle at a year low of ₦7.40. The stock currently trades at a YTD loss of 29.19%.
Fixed Income: We anticipate a quiet start to this week’s trading, with a bit of buying in the bond space. We expect investors who went short in anticipation of a rate hike from the MPC re-enter the bond market to cover their positions.
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