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Dow Sinks 390 Points in Global Selloff

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Dow

Stocks tumbled around the world, with U.S. equities sinking to their lowest levels since August, and bonds and gold jumped as oil’s plunge below $30 sent markets reeling. Treasuries extended gains as economic data and earnings added to concern that global growth is faltering.

The Dow Jones Industrial Average sank 391 points, European stocks fell into a bear market and the Shanghai Composite Index wiped out gains from an unprecedented state-rescue campaign as global equities added to the worst start to a year on record. Oil touched $29.28 a barrel before closing at a 12-year low. A measure of default risk for junk-rated U.S. companies surged to the highest in three years. Yields on 10-year Treasury notes dipped under 2 percent as doubts grow that the Federal Reserve will raise interest rates. Gold surged the most in six weeks.

Crude’s drop to a 12-year low is sending shock waves around the world at the same time concern is mounting that China’s policy interventions will fall short of stoking growth in the world’s second-largest economy. Figures on retail sales and manufacturing Friday showed the U.S. economy ended the year on a weak note, and the start of 2016 wasn’t any better. Energy firms are laying off workers and currency markets from commodity-producing countries are in turmoil. The slump is also denting the outlook for inflation, causing traders to curb bets on how far the Fed will raise rates this year.

“Markets have to go through several stages and right now they’re just holding their head and crying,” Krishna Memani, chief investment officer at Oppenheimer Funds Inc. in New York, said by phone. “The drama and issue overnight is more related to oil prices not finding a floor. If it was just China and everything else was OK, we’d see through that. But when China is down and oil drops everyday, the market recognizes it has substantial issues.”

Adding to the unease, Intel Corp. dropped 9 percent after predicting first-quarter sales that fell short of some estimates. The semiconductor maker’s note of caution came at the start of an earnings season that may see U.S. profits fall faster than any time since the financial crisis.

Stocks

The Standard & Poor’s 500 Index plunged 2.2 percent at 4 p.m. in New York. The index fell as much as 3.3 percent before paring the slide in afternoon trading. It still capped a third weekly retreat and closed at the lowest level since Aug. 25, the day that marked the bottom of the summer selloff. U.S. equities markets are closed Monday for a federal holiday.

The gauge has lost 12 percent from its May record, leaving it well short of sliding into a bear market. It capped a third weekly decline, the longest slide since July. The Dow tumbled 2.463 points as none of its 30 members advanced, while small caps added to a bear market.

“There’s more uncertainty out of China, more uncertainty out of the Fed and then you have uncertainty about where the bottom is in oil prices. Markets abhor uncertainty,” said Quincy Krosby, a market strategist at Prudential Financial Inc., which oversees about $1.2 trillion. “The package of economic data this week certainly questions whether or not we are going to pull out of this. This is a lot deeper than what you’d see normally on a three-day weekend.”

Weakness in retail sales compounds concerns that momentum in consumer spending, which has been the backstop of U.S. growth prospects, is starting to fade. Meanwhile, a slowdown in China and other emerging markets has sent commodity prices lower and roiled stock markets around the world, exacerbating the plight of manufacturers who are being hit by an appreciating dollar.

The Stoxx Europe 600 Index retreated 2.8 percent, capping a weekly drop of 3.4 percent. Europe’s benchmark closed more than 20 percent from its record in April — meeting the common definition of a bear market.

Commodities

West Texas Intermediate crude fell as much as 6.2 percent, before settling 5.7 percent lower at $29.42 a barrel. Brent fell 5.9 percent to $29.05 a barrel. The discount on global benchmark Brent reached a five-year high as Iran moved closer to restoring exports.
While WTI sank 11 percent for the week, Goldman Sachs Group Inc. says crude will turn into a new bull market before the year is out as the price rout shuts down production, putting the U.S. shale-oil boom into reverse in the second half of the year. As U.S. production slumps by 575,000 barrels a day, global oil markets will tip from surplus to deficit, the bank said in a report.

Gold capped the biggest gain in six weeks as Chinese stocks retreated into a bear market and U.S. retail sales capped the weakest year since 2009, increasing demand for a haven. Platinum fell to a seven-year low. The metal has been whipsawed this week, after rallying to a two-month high last Friday. Futures for February delivery gained 1.6 percent to settle at $1,090.70 an ounce.

The Bloomberg Commodity Index, which measures returns on 22 raw materials, dropped 1.4 percent to the lowest level in data going back to 1991.

Emerging Markets

The MSCI Emerging Markets Index fell 2 percent on Friday and 4.2 percent this week. Shares in Shanghai entered a bear market for the second time in seven months, dropping more than 20 percent from its December high and sinking below its low during the depths of a $5 trillion rout in August.

The Shanghai Composite Index sank 3.6 percent on Friday, extending losses after a report that some banks in Shanghai have halted accepting shares of smaller listed companies as collateral for loans. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 2.6 percent to a four-year low.

Currencies

An index of the U.S. currency against 10 of its peers rose for a third week, the longest stretch since July, amid demand for haven assets as oil dropped below $30 for the first time in more than a decade and Chinese stocks led a global rout.

Russia’s ruble sank 2 percent and South Africa’s rand fell 1 .3 percent, leading a gauge of emerging-market currencies down 0.5 percent, capping its third weekly decline. Over the five day period, the ruble slid 3.7 percent and the rand lost 2.1 percent. Brazil’s real and Mexico’s peso lost at least 0.9 percent on Friday.

Australia’s dollar slid 1.7 percent to the weakest level since April 2009. The Canadian dollar fell for an 11th straight day in its longest run of losses on record. New Zealand’s kiwi slumped 1.4 percent.

The yen appreciated against all its 16 major peers as turmoil in markets boosted demand for havens. The euro also gained, while the Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, rose for a sixth day.

Bonds

Treasury 10-year note yields slipped below 2 percent to the lowest since October, casting doubt on the Fed’s ability to raise interest rates.

U.S. Treasuries gained as traders pulled back expectations for the number of Fed interest-rate increases this year. Data compiled by Bloomberg shows they expect the effective fed funds rate will rise to 0.7 percent in a year’s time, implying one increase, compared with policy maker estimates for four. The 10-year yield fell 10 basis points to 1.99 percent.

The risk premium on the Markit CDX North American High Yield Index, a gauge tied to U.S. junk-rated companies, surged to the highest level since November 2012. Junk-bond funds reported $2.1 billion of redemptions in the week through Jan. 13, according to data provider Lipper.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Fuel Scarcity: Car Owners Abandon Vehicles as Nigerian Masses Stage Protest

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Petrol - Investors King

As the fuel scarcity bites harder across the country, vehicle owners have been abandoning their vehicles and opting for public transportation.

Investors King reports that some other Nigerians, especially civil servants have resigned to fate by trekking to work while others who could afford skyrocketing transport fares were moving around in public vehicles.

Findings across some states revealed that a litre of Premium Motor Spirit, popularly known as petrol, was being sold between N280 and N350.

This came as downstream petrol marketers have blamed the Nigerian National Petroleum Commission (NNPC) for only selling the petroleum products for private depots owners and ignoring retailers whose numerical strength outweighs that of the major marketers.

The scarcity is worsened because most filling stations were not operating while the few that are selling the product are struck with long queues, fighting and bribery.

At various Government Secretariats and other offices checked by Investors King, it was observed that the parking spaces were not filled with vehicles as it was usually done.

A civil servant who did not want his name mentioned lamented the fuel scarcity and hike in fuel price saying, “I have no choice than to keep my vehicle at home. My office doesn’t want to listen to excuse of wasting time at filing stations in search of fuel. So, I have to opt for public vehicle so that I won’t be sacked.”

Meanwhile, some aggrieved Nigerians have staged protests over fuel scarcity and the expensive prices of fuel and called on the Federal Government of Nigeria to find a lasting solution to the challenge.

The protesters blocked the Lagos Benin Expressway at Oluku Junction in expression of their displeasure, saying that hike in fuel is contributing negatively to skyrocketing prices of food items.

Many commuters and other road users were stranded during the demonstration as the busy road was totally blocked for hours.

“We can’t continue to experience this pain. We are tired. Government should find lasting solution to this issue. We are here just to let the world know that we are not happy and this fuel scarcity is really affecting us negatively. Enough is enough,” one of the protesters said.

There was no vehicular movement when the protesters, mostly youths, stormed the road.

Meanwhile, commercial motorists have been warned against steps they take in a bid to minimize the fuel consumption of their vehicles which could lead to loss of lives and property.

Speaking, the Executive Secretary, Office Of Transportation, Engr. Bilal Adiat said because petrol is scarce and expensive, hence commercial motorists are now improvising ways of reducing the fuel consumption of their vehicles so as to maximize profit.

Bilal said most of the steps taken by the commercial drivers are against the mechanical set-up of the vehicles which could lead to fire disaster and loss of lives and properties, urging for both motorists and Nigerians at large to be wary of the dangers inherent in keep fuel in gallons.

 

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Despite Nationwide Blackout, FG Reveals Discos Failed to Utilise 1,070.36MW

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power project

As major parts of Nigeria continue to complain of blackout, the Federal Government has revealed that Electricity utility firms otherwise known as the DisCos had a total of 1,070.36 megawatts unused between December 24 and December 30, 2022.

For most Nigerians, prolonged power outage they experience could be attributed to lack of sufficient megawatts within the reach of the power utility companies.

Discos had lamented low power supply from generating companies (GenCos), which they attributed the blackout to.

While blaming GenCos for the incessant drop in electricity supply, DisCos through a statement from Ikeja Electric said it has been shedding load owing to low power allocation.

The General Manager of the Corporate Communication Department, EKEDC, Godwin Idemudia, while apologising to customers, especially those affected by the power outage, lamented a sharp decrease from the electricity it gets from the grid, saying it was not enough to meet the demand of its customers.

Hence, the continued lamentation of electricity consumers who are at the receiving end of the excuses proffered.

But, contrary to the argument and excuse adduced by EKEDC, latest power utilisation data obtained from the Transmission Company of Nigeria, an agency of the Federal Government, revealed that the Discos did not utilise the over 1,070MW of electricity between December 24 and December 30, 2022.

Nigeria has 11 Discos including Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt and Yola.

Figures from TCN showed that there are electricity that utility firms were not releasing to electricity consumers.

On December 24, 2022, the figures showed that a total of 118.04MW of electricity was unused by Enugu, Ibadan and Port Harcourt Discos, while the eight other power distributors took and distributed excess load on that day.

Also, on December 25, nine power distributors obtained excess load allocation, but two others including Enugu and Ibadan, could not distribute a total of 93.73MW of electricity.

However, the next day, being December 26, the quantum of unutilised energy increased, as seven Discos, including Abuja, Benin, Enugu, Ibadan, Jos, Kano and Port Harcourt, failed to distribute a total of 198.82MW of electricity.

While four companies took excess load allocation, according to TCN’s data, six of the power firms were said to be unable to distribute 180.99MW of electricity on December 27, as the remaining five took excess load allocation.

The data further revealed that the six Discos that could not distribute the 180.99MW of electricity include Abuja, Enugu, Ibadan, Jos, Kano and Port Harcourt.

The transmission company further stated that five distribution companies comprising of Benin, Enugu, Ibadan, Jos and Port Harcourt, could not distribute 89.09MW of power on December 28.

TCN stated that five Discos accepted excess load allocation that was more than their maximum load nomination for that particular day.

 

 

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Economy

Nigeria’s Economy to Grow at a Subdued Pace in 2023 – CBN

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has said Nigeria’s economy would grow at a subdued rate in 2023 following a series of weak economic fundamentals.

The apex bank stated in the communique no 146 of the monetary policy committee signed by Godwin Emefiele, the Governor of the central bank, and obtained by Investors King.

According to the committee, global economic uncertainties heightened by Russia’s invasion of Ukraine, Covid-19 cases in China, rising interest rates and the surge in commodities prices are expected to spill over given Nigeria’s economic structure as a commodity-dependent nation.

Also, Nigeria’s rising inflation rate ahead of general elections is one of the factors that will weigh on growth in 2023 while the high unemployment rate, foreign exchange scarcity, and waning consumer buying power amid slowing new job creation are estimated to compound Nigeria’s woes.

On Tuesday, the monetary policy committee raised borrowing costs by 100 basis points to 17.5% from 16.5% despite the nation’s slowing growth. Nigeria’s economy grew at 3.54% in the second quarter of 2022 before slowing to 2.25% in the third quarter of 2022.

While there were reports that Electricity distribution companies (DisCos) have silently increased tariffs by as much as 19% since December 1, 2022 even with the fuel scarcity.

The Socio-Economic Rights and Accountability Project (SERP) on Monday filed a lawsuit against President Buhari over “the failure to reverse the unlawful, unjust, and unreasonable increase in electricity tariff, and to probe the spending of public funds as ‘investments and bailouts’ to DisCos and GenCos since 2005.”

Similarly, there are plans to remove fuel subsidy by the second half of 2023 in order to rein in expenditures and boost revenue.

All this at a time when the unemployment rate and earnings are at a record low, Naira to the dollar exchange rate at N750/$1 on the parallel market and manufacturing activities slowdown due to forex challenges would hurt growth in 2023.

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