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Breakfast Report - 29 October, 2018

The Week Ahead                                                                            

Even with Iranian output down 150,000 bpd in September alone due to the effect of U.S. sanctions, global crude oil prices have been on a downward trend in October, with Brent crude prices dropping from a year-high of $86.29/bbl at the start of the month to $77.21/bbl at the start of this week. Rising U.S. production, an ongoing U.S.-China trade war, and growing doubts over the pace of global GDP growth have all weighed on commodity markets. This bearish sentiment was also present in financial markets at the end of October as the DOW Jones and S&P 500 indices erased much of their 2018 gains. Oil prices have been very buoyant this year, rising from an average of $69/bbl in January to $79/bbl in September.                                  

Equity: With investors continuing to monitor earnings releases, sentiment was varied throughout last week though supported by strong gains at week close. We expect further releases to sustain healthy activity levels in the market. However, we expect sentiment to still be mixed across board.                  

Stock Watch: NB released its 9M’18 results last week, reporting a 38% decline in PAT to ₦14.8 billion and a Q3’18 standalone loss after tax of ₦3.6 billion. The company’s stock fell 486bps in Friday’s session to settle at ₦88.00, a 35% YTD loss.                                                                             

Fixed Income: Following higher stop rates at the OMO and bond auctions last week, we anticipate bearish trading to start the week. Whilst we expect broadly negative investor sentiment in the treasury bills market, we foresee milder yield advancement on bonds given market anticipation of reduced domestic government borrowing.