Global Economy

USA: The unemployment rate in the US rose to 4.1% in June 2024, the highest level since November 2021, up from 4% in May, surprising market expectations that had forecast the rate to remain unchanged. This increase coincided with a rise in the labor force participation rate to 62.6%, up by 0.1 percentage point. Meanwhile, the broader unemployment rate, which includes discouraged workers and those holding part-time jobs for economic reasons, remained steady at 7.4%. Despite the rise in unemployment, we observed average hourly earnings increased by 0.3% for the month and 3.9% year-over-year, aligning with estimates.

 

 

Sub-Saharan African Economies

 

 

Europe: The headline inflation rate in the Euro Area decreased to 2.5% YoY in June from 2.6% in May, in line with economists’ expectations, and strengthening the case for more interest rate cuts by the European Central Bank (ECB). Monthly inflation advanced by 0.2% whilst core inflation held steady at 2.9% YoY. Services had the highest annual inflation rate at 4.1%, unchanged from May, followed by food, alcohol, and tobacco at 2.5%, down from 2.6%; non-energy industrial goods at 0.7%, stable from May; and energy at 0.2%, down from 0.3%. The persistence of price rises in services at 4.1% will likely keep investors focused on the implications for future rate adjustments, following the ECB’s initial 25 basis-point cut in June.

Angola: Angola’s economy expanded 4.6% year-on-year in Q1 2024, marking the 13th consecutive quarter of growth and the fastest pace since Q1 2015. This acceleration was driven by significant gains in the oil sector (6.9% vs. 2.2% in Q4 2023) and robust performance in agriculture (6.2%), utilities (7.0%), internal trade (6.0%), and finance & insurance (10.2%). On a quarterly basis, GDP grew 2.1%, the highest rate since Q4 2016.

Kenya: Kenya’s economy expanded 5% in Q1 2024, slightly down from 5.1% in the previous period but still indicating solid performance. Agriculture, the country’s largest economic sector and employer, grew 6.1%, compared to 6.2% in the last quarter of 2023.

South Africa: In June 2024, South Africa’s gross foreign exchange reserves increased to $62.100 billion, the highest since March, up from $62.087 billion in May. This rise was driven by higher foreign currency reserves ($46.46 billion vs. $46.42 billion) and Special Drawing Rights (SDRs) ($6.23 billion vs. $6.21 billion), despite a slight decrease in gold reserves to $9.42 billion from $9.45 billion.

 

Domestic Economy

Major updates during the week:

  • Nigeria’s capital importation rose by 210% to $3.37m in Q1’24, this increase signifies a four-year high.
  • FG issues new tax initiatives in a bid to create a conducive business operating environment: deduction of withholding tax from the source and exempting SMEs with low-profit margins from withholding tax.
  • Oando Plc has successfully acquired 100% of the shares of Nigerian Agip Oil Company Limited (NAOC Ltd).

 

 

Nigerian Equity Market: Mixed Start to Second Half of the Year

The Nigerian Stock Exchange (NGX) dipped slightly this week, closing at 100,022.03 points, a 0.04% decline from the previous week. This comes despite buying interest in blue-chip stocks like Zenith Bank (+5.63%) and GTBank (+6.29%). Losses in Dangote Sugar (-5.81%) and JBerger (-9.59%) offset these gains. Overall, market capitalization fell by N20.75 billion to N56.58 trillion. The Banking sector led the gainers (+3.87%), while Consumer Goods (-0.69%) led the decliners.

 

Nigerian Fixed-income Market: Market players react to liquidity squeeze

This week, the Nigerian treasury bills market closed bearish, with selling interest in the long-end (22-May, 5-Jun, 6-Mar, and 20-Feb) causing the average yield to rise by 69 basis points to 22.76% (WoW). Similarly, the secondary bonds market continued its bearish trend, with the average yield increasing slightly by 2bps to 18.77% (WoW). However, there was a mild buying interest in the 19% coupon 2034 bond, leading to a yield decline of 19bps to 20.69% (WoW). The general selling interest in the local fixed-income market is attributed to a short squeeze in system liquidity.

In the Eurobond space, Nigeria’s Eurobond closed the week bullish, driven by buying in the mid to long end, causing the average yield to decline by 10bps to 10.09%. Looking ahead to next week, a relatively quiet trading session is expected following the scheduled treasury bill auction with N166bn on offer.