FCSL WEEKLY MARKET REPORT _ 19TH FEBRUARY, 2021

Global Economy –Rundown:
The United State Federal Reserve’s reaffirm its commitment towards offering continuous monetary support to the economy until full recovery is attained, as the U.S. economy remained submerged with the economic woes of the pandemic outbreak. The Fed signaled its intention to remain dovish with its Monetary stand all through to at least 2023. However, recent economic data have hinted at a possible rebound in the sector hardly hit by the pandemic, as the retail data for the month of January revealed a 5.3% growth, which was propelled by stimulus cheques spending, as consumers got paid $600 stimulus allowance by the government, majority of the Consumer spending for the month was expended on electronics appliance whose sales inched up by 14.7%, and other significant retail sales were recorded on furniture’s that increased by 11%. Also, the economy is beginning to exhibit some inflation worries, based on the producer price index readings that indicate a 1.3% increase, and if this momentum is sustained, this translates to an increased consumer price index. Therefore, if the inflation concern intensifies, then Fed may be forced to reconsider its dovish stand.
Domestic Economy –Rundown:
Nigeria’s inflation rate rose by 0.71 percentage point to 16.47% (year-on-year) in January 2021, which is the highest inflation readings in over three years, and the food index rose sharply to a record high of 20.57% in January 2021 compared to 19.56% recorded in the previous month, also, Core inflation increased by 0.48%percentage point in January to 11.85%. The highest price increases were recorded in prices of Passenger transport by air, Medical services, Hospital services, Passenger transport by road, Pharmaceutical products, Paramedical services. The continuous inflationary pressure being experienced in the economy is due to the ripple effect of the increased value-added tax, fuel price, electricity tariffs, and the prolonged insecurity challenges that have hampered the cultivation and harvesting of agricultural produces.
Also, the National Bureau of Statistics stated that the country’s economy has exited recession based on the fourth-quarter Gross Domestic Product readings that indicated a marginal growth of 0.11%, while the annual GDP for the year, contracted by 1.92%. The sectorial performance of the economy revealed that the Oil sector contracted by 19.76% in real terms for the quarter, while the Non-Oil sector grew by 1.69% in real term. According to the GDP component, Agriculture activities performance for the quarter surge by 3.42% and Services activities also increased by 1.39%, however, industries’ activities declined by 7.30%.
Currency:
The Naira contracted by 1.32% at the I&E FX window to settled at N410.00/USD, also at the parallel market, Naira dipped to N478/USD.
Equities
The equities weekly performance was bearish as the market contracted further for the week by 0.63% and the YTD ASI growth contracted to (0.21%). The weekly average sector performance of the NSE indices firmed up to 0.34%, this was driven by a 4.60% appreciation in the Oil & Gas index.
Fixed Income:
The system liquidity at the end of the week firmed up to N1.1trillion, despite strong liquidity, the open buyback rate and overnight rates surge to 20.00% and 20.50% respectively.
T-Bills secondary market activities returned bullish as the average yield declined by 4bps to 1.43% for the week, as market yields across the short and long maturity remain relatively muted, while substantial yield contraction was recorded within the medium-term T-bills.
The Bond secondary market remained bearish, as the average yield for the week inched up by 62bps to 10.05% and yield across all maturity spectrum firmed up. According to the Bond auction for the week, the aggregate Bond sold was N150Billion, at a respective clearing rate of 10.25%, 11.25%, and 11.80% for the corresponding maturity of 10years, 15years, and 25years.
 

 
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