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The Market Today - 13 June 2018

May inflation to drop to 11.3%
The National Bureau of Statistics (NBS) would release inflation statistics for May later today. We expect inflation to have moderated from 12.5% y/y in April to 11.3% y/y in May (Consensus: 11.4% y/y) amid flat m/m inflation of 0.8% (same as in previous four months in 2018). Given the flat trend in m/m inflation, the expected drop in inflation would be driven by the high base from 2017 inflation (May 2017: 16.3% y/y, 1.9% m/m). We expect this moderation to persist in the next few months (helped by base effects) though we anticipate more pressure from food prices amid the ongoing herdsmen conflict, and further out – greater demand-pull inflation from expansionary fiscal policy.

Oil & Gas sector supports another green close for ASI
The Nigerian Stock Exchange continued the week in the green with all but one key sector closing in the green, ASI up 83bps. We expect the bourse to sustain a marginally bullish trading pattern at mid-week as investors continue to cherry pick across sectors.     

Stock Watch: DANGFLOUR has added 20% over the last six sessions. The stock currently trades at a price of N10.70 and has declined 12% YTD, compared to the 5% YTD loss of the Consumer Goods sector.

Yields in F.I market head southwards
The Interbank Call rate advanced 334bps to 15.17% (previous: 11.83%) despite the CBN refraining from conducting an OMO auction yesterday. Sentiment in the T-bills space was mixed with a positive bias as yields declined 4bps on average. Likewise, trading in the bond space was bullish as yields on benchmark bonds declined 8bps on average. Specifically, buying was evenly spread across maturities in the space. We expect investors to tread cautiously ahead of the T-bills Primary Market Auction today at which the CBN will be offering N175 billion on the 364DTM bill, and thus expect a quiet session with a negative bias.