United States: US Labor Market – A Slight Shake Off
During the week, the US Bureau of Labor and Statistics released the employment situation report for December 2023. As culled from the report, unemployment rate growth stagnated at 3.7% YoY (same as November 2023). Nonfarm payroll employment increased by 216,000 compared to 199,000 in November 2023, an offshoot of higher job creation. The total number of unemployed people remained at 6.3mn. The labor force participation rate, a key metric for resolving a sharp divide between worker demand and supply dipped marginally to 62.5% (vs 62.8% in November). On a similar note, the employment-population ratio declined slightly to 60.1% from 60.4% in November 2023.
Source: BLS, Zedcrest Wealth
Sectors such as Government (+52,000), Health Care (+38,000), Social Assistance (+21,000), and Construction (+17,000) experienced notable increases in employment. The average hourly earnings for all employees on private nonfarm payrolls increased by 15 cents, representing a 0.4% month-on-month and a 4.1% year-on-year rise, reaching $34.27. Presently, wage growth surpasses its pre-pandemic average, and the 3.0% – 3.5% range is generally considered in line with the Federal Reserve’s 2% inflation target by most policymakers.
Source: BLS, Zedcrest Wealth
Despite some conflicting signals presented by the data, particularly the marginal declines in the labor force participation rate and the employment-population ratio, our analysis underscores the stability in the unemployment rate, the rise in average hourly earnings, and the consistent growth in nonfarm payroll figures. These factors collectively indicate that the US labor market remains sturdy and resilient.
Furthermore, we anticipate that wages will not experience a decline, considering the ongoing resilience of the economy despite concerns about a potential recession in 2023. In light of the current economic landscape, we foresee the US labor market maintaining its strength, which may prolong expectations for a rate cut, given the looming inflationary pressures amid geopolitical tensions.
Source: BLS, Zedcrest Wealth
A recent cause for concern is the escalating risk to supply chains due to disruptions in both the Suez and Panama Canal. Incidents in the Red Sea have compelled major shipping companies, such as Maersk, to redirect vessels to avoid the Suez Canal, opting for a longer route around Africa. This development has contributed to increased shipping costs and extended transport times, posing additional challenges to global supply chains.
Euro Area –December 2023 Inflation Figures Expected to See an Uptrend
According to the flash estimate released by Eurostat, the Euro Area inflation is expected to print at 2.9% YoY (vs 2.4% YoY in November 2023). The upsurge in inflation can be attributed to elevated energy prices given the base effects from energy markets, the expiration of subsidies placed by some European governments (Germany and France in particular), and supply disruptions emanating from the attacks across the Red Sea which have translated to increased transportation cost. 
Source: Eurostat, Zedcrest Wealth
Moving forward, we anticipate that this development will not substantially influence the European Central Bank’s (ECB) decision on interest rates, as it aligns with prior expectations. However, we predict a potential delay in implementing rate cuts if inflationary pressures persist in the coming months.
Domestic Economy
The Nigerian Stock Exchange – Santa Rally, January Rally.
During the week, the Nigerian Stock Exchange Group released the Domestic and Foreign Portfolio Participation on the Nigerian Bourse for November 2023. As culled from the report, Total Participation on the Bourse grew by 36.09% MoM and 188.05% YoY to print at NGN300.67bn compared to NGN220.94bn in October 2023. For context, Domestic Participation on the Bourse rose 22.24% MoM and 154.92% YoY to print at NGN220.30bn while Foreign Portfolio Participation rose 113.94% MoM and 394.59% YoY to NGN71.37bn.
Source: NGX, Zedcrest Wealth
The enhancement in the stock market further illustrates increased investor interest in bargain hunting, particularly considering the outstanding performance of certain stocks on the exchange. Anticipating the report for December 2023 to enhance our analysis and fully encapsulate the recent market dynamics, we firmly believe that domestic investors will continue to be the primary catalyst for performance in the equities market throughout 2024.
Purchasing Manager’s Index (PMI) – A Reflection of Macroeconomic Woes
Based on the Stanbic IBTC Bank Nigeria PMI report for December 2023, the Nigerian private sector experienced a resurgence, showing growth with notable increases in both output and new orders. The PMI figure for December 2023 reached 52.7 points. Although this data indicates a return to an expansionary phase after two consecutive months of contraction, we hold the view that this may be a temporary occurrence. Historical trends reveal that December typically yields improved PMI figures due to heightened demand and enhanced productivity stemming from year-end festivities and spending activities.
Source: Stanbic IBTC, Zedcrest Wealth.
Looking forward, we anticipate that inflationary pressures and a challenging business environment will likely restrain activities from reaching optimal levels in the coming months.
The Nigerian Equities Market – January Rally Upholds Strength in the Nigerian Equities Market
The Nigerian equities market concluded the initial week of the year on a positive trajectory, witnessing a notable advancement as the NGX All-Share Index (ASI) surged by 6.54% week-on-week, settling at 79,64.66 points. The Year-to-date (YTD) returns were pegged at 6.54%.
Leading the gainers chart were TRANSCORP (+46.19%, reaching NGN12.66), IKEJAHOTEL (+46.17%, closing the week at NGN8.77), and UNITYBNK (+45.06%, ending at NGN2.35). Conversely, the top losers for the week included CILEASING (-39.64%, now at NGN3.38), SCOA (-17.68%, settling at NGN1.63), and CHAMPION (-11.81%, closing at NGN3.66). With this robust performance, we anticipate the ongoing bullish trend to persist in the weeks ahead.
The Nigerian Fixed Income Market – Closing on a Bullish Note
The Nigerian Secondary Treasury Bills market closed bullish as the average yield advanced 34bps to close at 5.95%. Similarly, the secondary bond market closed bullish as average shed 41bps WoW to settle at 13.73% following significant buying interest across the curve. For the most part, the Naira Fixed income market closed the week on a bullish note as the average yield declined 37bps WoW to settle at 9.84%
