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The Market Today - 29 August 2017

Tropical Storm disrupts U.S. oil production                                                        

As the tropical storm Hurricane Harvey continues to buffet Houston, several local refineries have been shut down, taking nearly 2.2 million barrels a day of U.S. crude refining capacity offline (roughly 12% of U.S. refining capacity). Notably, Exxon Mobil Corporation closed its Baytown refinery in Texas, which has a capacity of 560,000 bpd, making it the second largest in the United States. U.S. gasoline prices initially surged to two-year highs on Monday on the back of the disruptions to fuel production. Meanwhile, global crude oil prices initially inched up on Friday, before pulling back yesterday as the persistent oil glut and high levels of crude storage before the storm hit eased fears of shortages. The disruptions to U.S. production could accelerate the rundown of global crude oil stocks and usher the market quicker towards rebalancing.                                                     

Bears dominate equity market at week open                                                    

Negative closes across most key sectors pulled the NSE ASI 90bps lower yesterday. Given the broad-based bearish sentiment, highlighted by negative intraday trading and widely negative market breadth, we anticpate another tepid trading session today.                                                   

Stock Watch: Last week, UBN proposed a rights issue of five ordinary shares for every seven ordinary shares held at ₦4.10 per share. The rights issue is priced at a discount to current market price of ₦5.90. UBN has returned 7.3% ytd.                                                                

CBN records no sale at OMO Auction                                                    

The CBN conducted an OMO auction, offering ₦40.00 billion across the 45DTM and 178DTM bills. However, the apex bank made no sale at the auction. On the currency front, the naira appreciated ₦1.00 to close at ₦367.50 in the parallel market but depreciated ₦0.02 to close at ₦359.58 at the I&E FX Window. The T-bills market opened the week on a mixed with a mild bullish bias as yields declined 3bps on average. However, buying sentiment heightened on maturities at the short end of the space. With yet another OMO auction expected in today’s session, we foresee mixed trading in the T-bills market to persist even as liquidity remains tight, however we expect demand to remain tilted towards the short end of the bond space as yields remain attractive.