FREE

The Market Today - 16 August 2018

Oil prices dip amid trade war and rising supply                                                

Oil prices have declined 3% so far in August, with brent closing at $70.51/bbl yesterday. The bearish turn has been driven by escalating trade tensions between the United States (U.S.) and China, with both countries threatening to impose tariffs on another set of imports. Although global economic growth has purred on, trade tensions pose a substantial threat to medium term growth outlook, thus having an adverse impact on oil demand. Meanwhile, OPEC data shows a slight rise in production between June and July, and this has been matched by expanding U.S. output in the early weeks in August to further weigh on prices. The moderation in oil prices in H2’18 is unsurprising as we had anticipated prices to decline from H1’18 average of $71.16/bbl on the back of expanding global supply and rising trade tensions.                                                

Market suffers ninth-straight session of losses                                                

"The Nigerian bourse remained on a downward trend yesterday, with the ASI down 60bps following red closes across all key sectors. We expect the ASI to extend the bearish streak to a tenth consecutive session today given the evidently negative sentiment prevalent across board.                                                   

Stock Watch: OANDO has been on a notable downtrend in recent sessions. The stock has lost 20% in the last eleven sessions, wiping out gains recorded post release of its H1’18 results. After touching a year high of ₦9.60, the stock currently trades at ₦4.55 and has lost 24% ytd, behind the Oil & Gas Sector Index ytd loss of 11%.                                                                                                            

Bearish trading persists amid PMA under sale                                                  

At the August bond auction, the DMO offered ₦90 billion across the 5-year, 7-year and 10-year tenors, eventually selling ₦40 billion at respective stop rates of 14.39%, 14.60% and 14.69%. Likewise, the CBN offered and sold ₦33 billion across the 91, 182 and 364 DTM T-bills at respective stop rates of 10.00%, 10.40% and 11.22% (previous: 10.00%, 10.40% and 11.30%). Amid this, Interbank call rate declined 88bps to 9.50%. Trading in the T-bills space was mixed yesterday (-4bps), with buying weighted on the short-dated bills. Notably, yield on the 29DTM bill declined 83bps to settle at 10.32%. However, sentiment in the bond space was more tepid as yields rose 5bps on average. Sell pressure was evident across the curve as yields on the 13.98% FGN FEB 2028 and 12.40% FGN MAR 2036 bonds rose 16bps and 11bps to 14.83% and 14.77% respectively.