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The Market Today - 25 September 2018

Brent crosses the $81/bbl threshold as OPEC stays hand Brent crosses the $81/bbl threshold as OPEC stays hand Brent crude prices crossed $81/bbl on Monday for the first time since November 2014 after OPEC refused to heed President Trump’s calls to boost production and ease prices. At its meeting in Algiers held over the weekend, the coalition of the world’s biggest oil producers, led by Saudi Arabia and Russia, explained that it was “satisfied with the current oil market outlook, with an overall healthy balance between supply and demand”. The rise in prices comes on the back of U.S. sanctions on Iranian exports and the Venezuelan economic crisis which have cut supply by nearly 1 million barrels a day in the past year, and with fresh U.S. sanctions expected in November, there is a more upside to prices. We expect prices to persist at these heady levels for the rest of the year amid the supply disruptions and note that this should have a positive effect on Nigeria’s oil earnings given its recent recovery in production.
Market recovery short-lived as ASI turns negative Despite the green close on Friday, market activity turned negative at the start of the week with the ASI shedding 27bps. Whilst buying interest persisted on banking stocks, three other key sectors closed lower. Market breadth turned negative with 13 advances and 25 declines. With bargain hunters seemingly losing steam by week open, we foresee tepid trading with a negative bias in today’s session as bears maintain the upper hand. Stock Watch: DANGFLOUR shed 338bps to reach a year-low of ₦7.50 yesterday, its lowest price since October 2017. The stock has lost 41% of its value this year and is currently trailing Consensus target price of ₦12.77. Fixed income market opens week to mixed trading Despite system liquidity of ₦497 billion, the Interbank call rate advanced 433bps to 8.33%. Trading in the fixed income market was mixed yesterday as yields trended in opposite directions – albeit with a positive tilt overall. Yields declined 14bps on average across T-bills, with buying most prevalent on the longer-dated bills as yields on the the 101DTM and 311DTM bills moderated 70bps and 51bps to settle at 12.45% and 14.73% respectively. Meanwhile, sell pressure was weighted towards the shorter-dated bills as yield on the 38DTM bill advanced 21bps to settle at 13.37%. A similar trend was observed in the bond space as yields on benchmark bonds moderated 1bp on average. Most advances were on the short end – the 14.50% FGN JUL 2021 bond advanced 11bps to close at 15.14%, whilst yield declines were observed at the long end of the curve – yield on the 12.1493% FGN JUL 2034 bond declined 10bps to close at 15.40%. We expect mixed trading to persist in today’s session as investors continue to tread cautiously ahead of the Monetary Policy Committee meeting to be concluded today. We expect the CBN to maintain all policy levers at the meeting.