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Breakfast Report - 8 May, 2017

On Sunday, Emmanuel Macron defeated far-right candidate Marine Le Pen in the French Presidential Elections as the independent centrist becomes the youngest president in France’s history. Macron, who served as Finance Minister in the outgoing administration, was the preferred candidate for the European Union (EU) and wider international community as his political stance is more aligned to the sustainability of the EU. The outcome of the vote is a slight relief for the union which must now negotiate terms of exit for the United Kingdom following last year’s Brexit vote.

With global oil prices hovering just below $50 per barrel at the start of the week, Saudi Arabia’s oil minister has revealed that he is confident that the OPEC oil output freeze agreement will be extended till year end. After rallying for the first four months of the year on reduced OPEC volumes, oil prices retraced gains recently as U.S. crude expanded beyond expectations. The OPEC agreement expires at the end of May and OPEC producers are set to meet on May 25 to agree on a possible deal extension. We highlight that Nigeria’s State Oil Minister Ibe Kachikwu is bullish that Nigeria will retain its exemption from the output cut if the agreement is extended. Should this happen, we expect Federal Government oil revenues to remain relatively strong.   

The Nigerian bourse rallied further last week as the NSE ASI notched 189bps, trimming ytd losses to 2.63%. The market opened the trading week to firm gains as investors continued to cheer the array of better-than-expected Q1’17 earnings results from the prior week. Although the gains faded towards week close as investors begun to take profit, the NSE ASI still posted an all-week win streak following sustained investor appetite towards select blue chips.

Whilst market sentiment remained positive at week close, we note that momentum slowed towards the end of the week as investors began to take profit on recent gains (ASI up 4% in 9 sessions). This week, we foresee continuous profit taking across stocks that have recorded sizeable gains in recent sessions.

Stock Watch: Following a five-day bull-run, FIDSON has gained 44% and currently trades at ₦1.58 – a seven-month high. The stock has returned 23% ytd.

With pressured liquidity driving selloffs across the curve, we expect sustained bearish trading in the Fixed Income market at the start of the week.