Breakfast Report - 17 September, 2018

The Week Ahead                                                                            

Brent crude prices dipped early on Monday, falling to $77.39/bbl (Friday close: $78.26/bbl) as fears of a shortage abated after data at the end of the previous week showed an increase in oil supplies. Furthermore, additional U.S. tariffs of $200 billion on Chinese imports expected this week have cast a cloud over oil demand in the latter part of the year. However, these factors are being upset by persistent concerns over sanctions on Iranian exports, with India, Iran’s second largest buyer, announcing a 50% cut in crude loadings from Iran in the coming months. With this, Brent crude prices began trending up during trading in Asian markets, recovering enough to breach the $78/bbl mark. Whilst we see the U.S.-China trade war weighing on medium-term oil demand, we expect declining Iranian exports to prop global oil prices.                                                                              

Equity: Bargain hunters supported a 95bps recovery on the equity market at week close. However, this was unable to offset much stronger earlier losses that saw the All-Share Index shed 502bps w/w. As market sentiment remains evidently weak and sell-pressure persists on blue-chip stocks across all key sectors, we anticipate another bearish start to trading today.                                                                   

Stock Watch: : FLOURMILL shed 11.63% last week, bringing the stock to a 16-month low of ₦19.00. At a 48% discount from our target price (₦36.32) the stock is currently rated BUY.                                                 

Fixed Income: We expect the tepid trading activity to continue today as market participants anticipate further yield uptick.