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The Market Today - 26 February 2019

U.S. President returns to put pressure on OPEC                                       

Similar to his statement in December 2018, U.S. President Trump has once again decried rising crude prices, calling on OPEC to “take it easy” via twitter. Following the tweet, Brent crude prices dipped 3.5% on Monday to settle at $64.67/bbl, with traders monitoring the cartel's reaction. Interestingly, whilst the second round of OPEC cuts have been largely responsible for the rally, U.S. sanctions on Venezuela and Iran have contributed to the price uptick, with Vice-President Mike Pence calling on European leaders to join the U.S. in imposing sanctions on the gulf state especially. Meanwhile, oil markets have also been buoyed by the ongoing trade talks between the U.S. and China in the last two weeks. That said, investors are cautious about the implications of the tweet, drawing parallels to the recent statement in 2018 which was followed by a relaxation of sanctions on Iran. Whilst we expect benchmark crude prices to remain stable above $60/bbl, we highlight the possibility of oversupply keeping prices at the lower-end of the price floor.                            

Equity market gains as investors await election results                                      

As the market continues to await the announcement of the results of the recently concluded elections, the NSE ASI rose 57bps at week open particularly buoyed by the Consumer Goods sector. Market breadth was positive with 24 advances and 8 declines. While the anticipation of final election results and outcome will continue to see drive some cautious sentiment, we expect trading to maintain a positive tilt in today’s session.                                          

Stock Watch: ABCTRANS gained 9.62% yesterday to settle at ₦0.57, its highest price since September 2015. The stock is currently the best performing stock on the exchange, recording a year-to-date return of 97%.                                     

Fixed income market sees strong demand at week start                                     

The CBN refrained from conducting an OMO auction yesterday. Meanwhile, the Interbank Call rate declined 117bps to close at 17.64%. Amidst this, trading in the secondary T-bills market remained positive, with buy interest concentrated at the short-end of the curve and average yields declining 17bps. Following the slowdown in liquidity mop-ups, we foresee further demand in the T-bills market today. Also, we expect to see increased investor participation as the collation of election results conclude.