What shaped the past week?
This week, all eyes were focused on the US as Mid-term elections and the Federal Open Market Committee meeting drove activity. On Monday, the DOW Jones and S&P 500 indices rose thanks to gains in the financial sector. Meanwhile, European markets closed mixed while Asian markets traded lower as investors remained cautious over global growth prospects. The trend continued Tuesday as US markets closed higher, while political uncertainty weighed on European and Asian markets. Following the conclusion of the US mid-terms, US markets recorded their strongest postmidterm elections rally since 1982, and European markets also gained while activity in the Asian region remained muted. On Thursday, news of the latest monetary policy decision from the Federal Reserve dragged US markets, European markets were slightly positive. However, Asia markets stayed positive, tracking the Wednesday rally in the US. Global markets closed mixed at the end of the week following the conclusion of the US Federal Reserve meeting.
Nigerian officials will embark on a three-day road show in London at the start of the week ahead of the planned $2.8 billion Eurobond sale this month. The Senate earlier approved the issuance of the Eurobond from the International Capital Market to finance the 2018 budget and this would be the second Eurobond sale this year after a total sale of $2.5 billion in February 2018 to refinance local currency debt. The cost of foreign borrowing is likely to be higher than for previous issues, on the back of higher yields in developed markets following U.S. interest rate hikes. A $1.25 billion 20year Eurobond was sold in February 2018 at a rate of 7.696% but closed at 8.672% yesterday. As such, we expect the coupon rate on a similar-tenored instrument to breach the 8% mark.
Trading pattern on the Nigerian Stock Exchange remained mixed throughout the week, as the All-share Index alternated between negative and positive territory through all the trading sessions in the week. Though the market closed in the red three out of five times, the ASI closed 23bps higher w/w. Notably, the largest gain recorded during the week was on Thursday with the ASI rising 37bps thanks to gains in the Banking sector (+102bps d/d), driven by interest in GUARANTY (+121bps d/d) and ZENITHBANK (+125bps d/d). For the week, Oil & Gas (+160bps) and Consumer Goods (+11bps) were the only sectors gainers, supported by solid performances in SEPLAT (w/w: +696bps) and NESTLE (w/w: +735bps). On the other hand, the Industrial Goods (w/w: -381bps) and Banking (w/w: -47bps) sectors closed in the red following heavy declines in WAPCO (w/w: -14.29%) and CCNN (w/w: -11.60%), and ACCESS (w/w: -778bps).
Fixed Income: With the CBN opting to hold off on OMO