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The Market Today - 09 October 2018

IMF cuts global growth forecast, cites trade war IMF cuts global growth forecast, cites trade war

The International Monetary Fund (IMF) cut its 2018 and 2019 global GDP growth forecasts from 3.9% y/y to 3.7% y/y in both years on the back of growing concerns over the effect of the U.S.-China trade war on the global economy. The projection pegs the expected real global GDP growth for 2018 and 2019 at 2017 level — a shift from the initial view of an acceleration in growth. The Fund stressed the negative impact of the trade war, evidenced by its downgrade of GDP growth across key markets in 2018 and 2019. Meanwhile, growth in the Sub-Saharan Africa region is projected to accelerate from 2.7% in 2017 to 3.1% in 2018 (albeit 0.3% lower than the April 2018 forecast) and 3.8% in 2019. Interestingly, about half of this growth acceleration will be supported by a projected rise in Nigeria’s GDP growth from 0.8% in 2017 to 1.9% in 2018 and 2.3% in 2019, spurred by a recovery in oil production and prices.

Week commences on a positive note

The NSE ASI began the week slightly in the green, inching up 19bps thanks to mild gains in the Banking sector. Meanwhile, investor sentiment remained weak, with market turnover falling to ₦1.3 billion. Market breadth remained positive with 16 advances and 11 declines. In spite of yesterday’s moderate gain, we note that underlying sentiment remains tepid and expect a mixed trading session today, even as activity remains muted.

Stock Watch: Despite the sustained interest in Banking stocks, UBA has lost 3% over the last 4 sessions to settle at ₦8.15. The stock currently trails its year high of ₦13.00 by 37% and has lost 21% YTD, underperforming the banking sector (-14%).   

Fixed income starts off bearish in the new week

System liquidity stood at ₦303 billion at the start of the week. Amid this, the interbank call rate declined 217bps to 9.50%. Trading sentiment across the secondary market was negative yesterday. Yields advanced 3bps on average across treasury bills, with yields on the 157DTM and 346DTM bills advancing 42bps and 44bps to settle 13.61% and 15.27% respectively. Despite this, there was notable demand on the 115DTM bill, with its yield declining 26bps to settle at 12.79%. The bond market was likewise bearish as yields on benchmark bonds advanced 8bps. In particular, the yields on the 13.98% FEB 2028 and 16.25% FGN APR 2037 bonds advanced 8bps and 13bps to settle at 15.18% and 15.19% respectively. On the back of improved system liquidity, we anticipate stronger demand in today’s session.