The Market Today - 05 December 2018
Saudi oil minister raises doubts over output cuts
Saudi Energy Minister Khalid Al-Falih, in an interview with Bloomberg made clear that any cuts to OPEC+ oil supply would need to be agreed by all of the members of the group, including non-OPEC allies such as Russia and Kazakhstan. His comments put a somewhat downbeat tone on market sentiment which had previously strengthened following news of an agreement between Russian President Vladmir Putin and Saudi Crown Prince Mohammed Bin Salman. Al-Falih clarified that the output cuts had only been agreed “in principle”, also making no guarantees over the actual size of the cuts the bloc would agree to. The oil minister’s comments were also less conclusive than those made in Abu Dhabi last month when he said the group should consider a reduction of up to 1 million bpd. Saudi Arabia has been under pressure from U.S. President Donald Trump to reduce oil prices, a situation which complicates any potential output cut and reduces the upside for oil prices.
Banking sector supports a 68bps gain in ASI
The ASI gained 68bps yesterday supported solely by a strong uptick in the banking sector. Market breadth remained positive with 26 advances and 17 declines. With bargain hunting supporting a positive close and improved market sentiment, we foresee a mixed trading pattern with a positive tilt in today’s session.
Stock Watch: After straight losses, FBNH has gained in 3 consecutive trading sessions. The stock gained 270bps yesterday to settle at ₦7.60 and is currently trading at 14% its year open price
CBN continues with high OMO frequency
The CBN conducted an OMO auction yesterday, offering ₦250 billion across three maturities and selling ₦95 billion on the 191DTM and 324DTM bills at stop rates of 13.50% and 15.00% respectively (effective yields: 14.53% and 17.31%) – in line with previous auction rates. Meanwhile, the interbank call rate advanced 200bps, closing at 8.67%. In the secondary fixed income market, trading turned mixed, albeit still with a bearish tilt. With the CBN showing no signs of slowing down on its mop up actions, we foresee another bearish trading session in the secondary market today.
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