Global Economy

USA: US business activity surged in early May at the fastest pace in two years, led by stronger service sector growth and rising inflation. The S&P Global flash composite PMI rose over 3 points to 54.4, the highest since April 2022, surpassing analyst’s estimates. This increase contrasts with earlier data showing weak April retail sales and a drop in factory output. In May, service provider activity growth hit a one-year high, while manufacturing output also grew faster.

 

 

Europe: The HCOB Eurozone Manufacturing PMI rose to 47.4 in May 2024, its highest in 15 months, up from 45.7 in April and exceeding market expectations of 46.2, according to flash estimates. Despite manufacturing production declining for the 14th consecutive month, the rate of decline slowed, indicating potential stabilization. New business saw its smallest decrease in two years, though employment trends continued to decline. In response, euro-area companies cut back on purchasing activity and reduced stocks of both raw materials and finished goods more than in April.

South Africa: South Africa’s annual inflation rate eased to a four-month low of 5.2% in April 2024, down from 5.3% in March. Despite this decline, it remains above the central bank’s preferred level of 4.5%. The decrease was mainly due to softer prices for food and non-alcoholic beverages (4.7% vs. 5.1% in March), with most sub-categories experiencing lower annual rates.

Egypt: The central bank of Egypt maintained its interest rates at a record high of 27.25% during its meeting on May 23, with the overnight lending rate also held at an all-time high of 28.25%.  While real GDP growth slowed to 2.3% in Q4 2023, inflationary pressures have eased, with headline and core inflation declining to 32.50% and 31.80% in April 2024, respectively.

Ghana: According to two government sources, Ghana has signed an MoU with its bilateral creditors, including China and France, to restructure $5.4 billion of debt, coming one and a half years after Ghana defaulted on its debt. The MoU facilitates the approval by the IMF executive board for the disbursement of $360 million under Ghana’s $3 billion, three-year bailout programme, expected next month.

 

Domestic Economy

Major Updates during the week:

  • CBN maintains its hawkish stance and raises the monetary policy rate by 150 bps to 26.25% in a bid to subdue inflation
  • GDP print for Q1 2024 was released during the week with real GDP growth  printing at 2.98%
  • Foreign reserves increased by $530m in one month to $32.7bn

 

 

Nigerian equity market: Banking slump drags Nigerian stocks down despite oil gains

After a mixed trading week, the local bourse ended the week on a bearish note, losing over N200 billion in market capitalization. The All-Share Index fell 0.52% to close at 97,612.51 points, dragging year-to-date returns down to 30.54%. Financial services and conglomerates were the most active sectors, while banking stocks led the decline with a 7.52% drop. Leading the gainers was the oil & gas sector and the which gained 0.72% during the week.

 

 

Nigerian Fixed-Income market: Market Ends Week Bullish Despite Eurobond Yield Rise

Last week, the DMO sold NGN638.97bn worth of treasury bills (NTB) across three maturities, at an average stop rate of 18.21% (vs 17.98%) at the last auction. For proper context, the 91-day and 182-day NTB printed slightly higher at 16.50% and 17.45% respectively (vs 16.24% and 17.00% at the previous auction), while the 364-day printed lower at 20.69% (vs 20.70% previously). Following several silent sessions this week due to the CBN MPC meeting and NTB auction, the secondary market closed bullish as the average yield declined by 19bps to print at 21.98%. The bond market also closed positive with the average yield slipping by 2bps. All in, the Nigerian fixed income market closed bullish while the Nigerian Eurobond market closed bearish with the average yield advancing by 24bps to 9.97%.