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The Market Today - 07 February 2018

Global Markets remain under fire                                              

Sell-offs persisted across Global markets following record losses at week open. The sharp turn in market sentiment can be traced to concerns over an imminent interest rate hike in the United States and worries over an over-valued equity market. The rout extended into Emerging Markets and commodity markets amid signs of capital race-to-safety. With the U.S. Federal Reserve moving to assuage market worries over the path of monetary policy in 2018, we foresee greater calm in the market over the coming sessions, though we still expect notable equity market correction – particularly in the U.S. – by the end of the week. Moreover, we expect a strong global growth outlook to support commodity prices in the near-term and buffer Emerging Market commodity-exporters.                                

Bears steer trading dynamics                                         

The Nigerian bourse sank deeper into negative territory yesterday – dipping 87bps – as all key sectors closed in the red. Red closes across key sectors and widely negative market breadth reflect the bearish sentiment in the market yesterday. With sell pressure still evident at session close, we foresee the slump persisting through today’s session.              

Stock Watch: SKYEBANK has shed 20% in the last five sessions, as interest wanes on select Tier II banking names. Though the bank has not released its post-2015 financial statements, the stock has gained 146% ytd and currently trades at ₦1.23.                                     

U.S. rate uncertainty drives yields northward                                    

The CBN conducted an OMO auction yesterday, offering ₦10 billion and ₦30 billion on the 93DTM and 191DTM bills respectively. While no sales were made on the 93DTM bill, the apex bank sold ₦21 billion on the 191DTM bill at a stop rate of 14.40% (effective yield: 15.57%). Trading in the fixed income market was bearish yesterday as investors mulled the possibility of an imminent U.S. Federal Reserve rate hike. Whilst yields on T-bills advanced 26bps on average, yields on benchmark bonds were up 24bps on average following intense sell pressure. We anticipate further bearish trading in today’s session amid investor concern over monetary tightening in the U.S.