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The Market Today - 01 August 2017

Oil holds above 50 for the first time in two months                                     

Ahead of a U.S. Energy Information Administration (EIA) report on Wednesday, Brent crude, the global oil price benchmark continues to trend higher (Currently:$52.74bbl), after closing above $50 bbl last Thursday (the first over-50 close since June 6). According to data from the EIA, U.S. stockpiles have declined by almost 26 million barrels since the end of June and gains have been sustained amidst investor expectation of further drops in Shale production levels. Investors are also bullish on the back of key announcements from Saudi and Kuwait expressing willingness to deepen cuts. We recall that Nigeria (one of two member nations exempt from the cut) also stated that it was willing to join the output freeze agreement upon achievement of production stability. We expect resurgent oil prices coupled with the relatively stable production to further boost government revenues and aid budget implementation.     

NSE takes a dip, ASI down 276bps                              

Amidst a slew of corporate earnings releases, sentiment waned on the Nigerian Stock Exchange as the ASI dropped 276bps, driven by significant profit-taking on blue chips.         

Stock Watch: DANGSUGAR released its H1’17 results showing strong earnings growth and reporting an interim dividend of ₦0.50/share. With the stock up 10.22% yesterday, we expect further demand today. The stock currently trades at ₦11.97 and has returned 96% ytd.

Trading restriction keeps fixed income market tight                                    

The CBN carried out an OMO auction yesterday, offering ₦80 billion and selling ₦61 billion across the 185DTM and 332DTM bills at respective stop rates of 17.95% and 18.55% (effective yield: 19.74% and 22.31%). Interbank Call rate rose 17bps to 5.17%. We understand that FMDQ suspended the  two-way quote system yesterday in a bid to clear the settlement backlog in the fixed income market. We expect activity in the fixed income market to remain tepid today as two-way trading remains suspended. However, sentiment in the T-bills is expected to remain broadly bullish as FAAC inflow from the prior week close continues to support liquidity.