Global Economy
United States Economy- Labour Market Send Mixed Signals Amid Dip in Unemployment Rate
According to the US Bureau of Labor Statistics released labor market data for March 2024. Nonfarm Payrolls rose by 303,000 (vs 275,000 previous month). The Unemployment Rate rose 3.8% YoY (vs 3.9% in February 2024). Furthermore, the number of unemployed people dipped marginally to 6.4mn compared to 6.5mn in February. Both the labor force participation rate and the employment population ratio edged up marginally to 62.7% and 60.3% respectively.
Trend Analysis of Key US Labor Market Figures
Source: US BLS, Zedcrest Research.
The Health Care (+72,000), Government Employment (+71,000), Hospitality (+49,000) and Construction (+39,000) saw the largest uptick in job gains. Average hourly earnings rose by 12 cents (vs 5 cents in February) to USD34.69.
Considering the figures above, we uphold our perspective that the US labor market will undergo a softening trend in the forthcoming months. With layoffs reaching a 14-month peak and job cut announcements rising to 90,309 in March (compared to 83,638 in February), we anticipate a deceleration in economic activities, mirrored by the slower GDP growth in Q4:2023 (3.4% YoY). However, the uptick in earnings might sustain inflation levels, potentially prompting the US Federal Reserve to postpone rate cuts.
Trend Analysis of Average Hourly Earnings Rate
Source: US BLS, Zedcrest Research
The deceleration in the GDP growth compared to Q3:2024 can be attributed to slowdowns in Private Inventory Investment, Federal Government Spending and Residential Fixed Investment.
Looking ahead, we foresee further slowdown in the GDP figures as we expect slower demand amid a lower in Personal Income and Government Spending to keep economic growth tepid. Furthermore, we do not expect a rate cut by the US Fed in early H2:2024.
India – RBI Maintains Repo Rate at 6.5% for 7th Consecutive Meeting, Prioritizes Inflation Management Amid Strong Growth Expectations
The Reserve Bank of India (RBI) left its benchmark interest rate unchanged for the seventh consecutive policy meeting, keeping the repo rate at 6.50%. The decision reflects the expectation of robust economic growth while grappling with stubborn inflation (5.09% YoY: Feb) above the 4.00% target. RBI Governor Shaktikanta Das emphasized the importance of managing inflation while focusing on sustaining economic growth. Despite the recent decline in core inflation to below 4.00%, concerns remain about food price volatility.
The RBI’s outlook for the Indian economy projects a 7.00% expansion in fiscal year 2025, highlighting the potential resilience of rural demand, employment conditions, and sectors like manufacturing and services despite challenges in consumption growth. India’s GDP is estimated to have grown by 7.60% in the fiscal year ended March 31, 2024, but concerns linger about subdued consumption rates, signaling ongoing economic complexities.
Oil Prices – A Reflection of Economic Outlook, Geopolitical Tensions and Production Cuts
Recently, we have noticed the uptrend in oil prices following recent market realities. This uptrend has raised speculations that there might be an impending upsurge in oil prices in the coming months. This may spur another round of inflationary pressures, an issue that economies have been battling since 2022.
The slow economic outlook in China, the world’s largest importer remains a major issue as property sector crisis remains in the horizon. Similarly, recessionary fears across the globe following previous aggressive interest rate hikes by major central banks has left the outlook for oil demand gloomy.
Furthermore, geopolitical tensions following the prolonged Russia-Ukraine conflict and the gory Israel- Hamas War has kept prices elevated. Additionally, the decision of OPEC and its allies to cur oil production further exacerbates supply chain disruption. These factors remain the major reasons for the uptrend in oil prices.
Looking ahead, we do not see oil prices tapering in the short term as we believe that these factors combined will keep prices elevated. This might keep inflation stronger than expected despite the current economic slowdown.
Trend Analysis of Brent Crude and WTI
Source: Bloomberg, Zedcrest Research
Domestic Economy
The Nigerian Equities Market – Profit Taking in the Local Bourse Erodes Gains.
The local bourse extended losses from previous weeks as investors take profit across sectors, as the market closed the week on a bearish note. In all four trading sessions for the week, market capitalization dropped to N58.49trn from N59.12trn in the previous week. In consequence, the year-to-date returns stood at 38.33%.
The Banking sector recorded the most losses in this week’s trading session, declining 6.73% WoW. The Consumer Goods led the gainers chart, increasing 94bps WoW. We noticed profit taking in MTN (-2.16%), GTCO (-8.57%), ZENITH (-4.49%), FBNH (-14.21%), JULIUS BERGER (-11.36%), CWG (-10.00%), and STERLING (-12.96%) net of the gains in DANGSUGAR (+13.46%), ETI (+6.12%), OKOMUOIL (+1.65%), IKEJA HOTEL (+13.53%), and MAY&BAKER (+19.09%).
Leading the price advancers for the week were CUTIX (+22.69% to N3.19), MORISON (+20.45% to N2.12), and MAYBAKER (+19.09% to N6.55).
On the flipside, leading the top price decliners were FBNH (-14.21% to N30.50), STERLINGNG (-12.96% to N4.70), and JBERGER (-11.36% to N58.50).
The Nigerian Fixed Income Market – Mixed Sentiments
The Nigerian Secondary Treasury Bills market closed the week bearish as the average yield advanced by 125bps WoW to settle at 18.91%. We noticed more selling interest on the short to mid end of the curve particularly the 09-MAY-2024, 23-MAY-2024, 27-JUN-2024 and 25-JUL-2024 as the yield rose 196bps, 185bps, 157bps and 146bps WoW respectively.
On the other hand, the Secondary Bond Market closed the week bullish as the average yield declined by 18 basis-points WoW to close at 19.31%. This is following major buying interest from offshore investors on the short to mid-end of the curve particularly the MAR-2027, FEB-2031, FEB-2034 as the yield declined by 78bps, 67bps and 44bps WoW.
For the most part, the Fixed income market closed the week bearish as the average yield increased by 53 basis-points WoW to settle at 19.11%.
In the Eurobond market, we saw a bearish week as the average yield soared by 16bps WoW to settle at 9.58%. This performance is driven by selling interest across the curve, particularly the SEPT-2028 and FEB-2038 Eurobonds as their yields advanced by 25bps and 19bps WoW respectively.
