The Market Today - 07 November 2018

US Congressional split could check Trump’s foreign policy                                                         

The Democratic party is poised to take control of the US House of Representatives according to exit polls, as they only need to secure a few more seats to gain a majority in the lower house of Congress. Although the Republican party retained control of the Senate, this split in Congress brings an end to the effective Republican control of the three branches of government—the Supreme Court is split 5-4 in favour of the Republican party. This is likely to increase the Democrat’s ability to check President Trump’s powers and gives them greater influence over policy. In particular, foreign policy issues such as immigration and Saudi Arabia may become more complex as the Democrats are generally more skeptical of the Middle East giant (unlike President Trump) and more receptive of immigration.                                                    

Consumer Goods lift ASI despite weak sentiment                                                          

"Paring losses from the prior session, the All-Share Index recorded a +33bps gain as notable advances in the Consumer Goods sector outweighed losses recorded across other key counters.  Market breadth remained negative with 14 advances and 23 declines. Despite yesterday’s positive close, market sentiment remains weak and the overall trend of activity (23 losers vs 14 gainers) points towards another negative close for today’s session.                                                    

Stock Watch: Following a 155bps loss in yesterday’s session, FIDELITYBK has now lost 8% in the last 7 sessions to close at ₦1.92, a 23% loss YTD. We note that the bank recently reported a 25% y/y rise in PAT in its 9M’18 results.                                                       

Fixed income yields trend upwards following OMO mop-up                                                     

"The CBN held an OMO auction yesterday, selling ₦322 billion (₦500 billion offered) on the 121DTM, 184DTM and 338DTM bills at stop rates of 11.50%, 13.00% and 14.50% respectively (effective yields: 11.96%, 13.91% and 16.75%). Amid this, the Interbank Call rate advanced 175bps to settle at 4.83%. While stop rates at yesterday’s OMO auction came above secondary market levels, we expect still healthy liquidity levels – barring another OMO auction – to support buying activity in the T-bills market. Meanwhile, we anticipate further yield advances in the bond space, as sentiment remains tepid on the long-end of the curve.