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The Market Today - 26 September 2017

Brent crude price reaches highest level in 26 months                                                    

Amidst a gradual rebalancing in the global crude oil market following increasing compliance to the OPEC output cuts, Brent crude price hit $59.48/bbl yesterday, its highest since July 2015. This rally has been supported by slightly stronger Chinese demand, as well as Turkey’s threat to block supplies from Kurdistan as the autonomous region holds a referendum on independence. Overall, Brent crude has gained over 30% since June as global stockpiles have tightened, with demand in industrialized countries expanding alongside emerging markets for the first time in almost a decade. Further fueling this jump, the disruption to U.S. crude output in the wake of Hurricane disasters has buoyed oil bulls and encouraged OPEC producers that the global crude market is accelerating towards rebalancing. Even with U.S. shale production recovering in recent times, we expect healthy demand and strong OPEC compliance to support oil prices in the near term.                                                          

Bears dominate Nigerian bourse at week open                                                

Shrugging off gains from last week, the Nigerian equity market opened the week in the red, down 36bps. Given the negative closes across most key sectors and weaker market turnover at the start of the week, we expect another session of sideways trading as investors’ sentiment remain weak.                                                           

Stock Watch: GUARANTY declined 25bps yesterday after a five-session rally which drove the stock 7% higher. The bank recently revealed plans to buy back its 2018 Eurobond. GUARANTY currently trades at ₦39.50, below consensus target price of ₦40.69, and has returned 60% Ytd.                                                            

Tepid trading at week open as Investors eye MPC meeting                                                        

The CBN conducted an OMO auction yesterday, offering ₦10 billion and ₦50 billion across the 94DTM and 178DTM bills respectively. Despite the mop-up, Interbank Call rate declined 833bps to 24.67%. Whilst no bids were seen on the 94DTM bill, the apex bank sold c.₦55 billion on the 178DTM bill at a stop rate of 17.95% (effective yield: 19.67%). Sentiment in the T-bills market turned mixed albeit with a bearish bias at week open as yields trended in opposite directions. Particularly, whilst yields on the 24DTM declined 175bps to close at 14.30%, yields on the 178DTM bills rose 183bps to settle at 19.53% - closely tracking the auction result. We expect investors in the fixed income market to continue to tread cautiously as market awaits the conclusion of the Monetary Policy Committee meeting today, even as tight liquidity keeps a lid on buying activities in the market.