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The Market Today - 14 June 2018

U.S. Fed rate hike weighs on emerging markets                                                              

The U.S. Federal Reserve hiked base interest rates by 25bps to 2% yesterday and increased their 2018 rate hike forecast from three to four, signaling a quicker pace of monetary tightening. On the back of this, emerging market equities dipped amid fears of possible currency depreciation on the back of more hawkish U.S. monetary policy outlook. The MSCI Emerging Markets Currency Index tracking emerging market currencies fell below its 50-week moving average yesterday for the first time since December 2016, indicating downward pressure. We anticipate the tighter Fed outlook may induce greater capital reversal from emerging markets even as the U.S. economy and yields grow in appeal.                                        

Gains fizzle out on NSE, ASI loses 35bps                                                              

The Nigerian bourse returned to negative territory at mid-week as more sizable losses on Consumer and Banking stocks drove a 35bps moderation on the All-Share Index. Noting the streak of positive sessions recorded recently, it appears profit taking has become more sizeable in the equity space. Although we expect trading to remain largely mixed, we foresee a borderline bearish close in today’s trading session.                                                              

Stock Watch: UBN has gained 17% in the last seven sessions. The stock currently trades at a price of N6.20 and has declined 21% YTD, compared to the positive 4% YTD return for the Banking sector.          

Stop rates rise at T-bills Primary Market Auction                                                             

The CBN conducted a primary market auction yesterday offering and selling N181 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 10.20%, 10.50% and 11.50% higher than rates at the last PMA (previous: 10.00%, 10.30% and 11.00%). The T-bills space traded in a sideways pattern yesterday amidst mixed trading sentiment that saw yields trend in opposite directions.  Similarly, sentiment in the bond space was varied with a mildly bullish tilt as yields on benchmark bonds declined a meagre 1bp on average. We foresee the CBN coming in with an OMO auction today in line with the prevailing trend amidst an expected liquidity inflow of N244 billion. As such, we expect another quiet trading session with a mildly bearish bias today.