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Third-quarter Results to Shape Market Trend – Analysts

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  • Third-quarter Results to Shape Market Trend

Financial analysts have said that the release of the third quarter results will determine the outcome of the stock market trading sessions this week.

The analysts, said the capital market was likely to experience increased trading activities as some investors had begun to take position in terms of investment decisions.

They, however, attributed the market performance last week to a mix of bargain hunting and profit taking activities by investors.

“In the coming week, we expect an influx of corporate scorecards for the Q3 2016 to dictate the general market mood,” analysts at Meristem Securities Limited said in the firm’s weekly market analysis.

Mixed reactions pervaded the Nigerian equities market last week, as index appreciated in three out of five trading days of the week.

The Nigerian Stock Exchange All-Share Index gained marginally by 0.09 per cent week-on-week to settle year-to-date return at –2.73 per cent.

Due to the holiday effect in the penuktimate week, the volume and value of transactions appreciated by 24.38 per cent and 45.52 per cent week-onm-week. For the week, 22 stocks gained as against 43 decliners, representing a negative market breath.

For the fixed income market, system liquidity increased last week, following the Open Market Operations repayment of N233bn. However, there was OMO auction worth N152bn in the week.

The Central Bank of Nigeria through the Debt Management Office conducted a primary market bond auction and raised N10bn, N45bn and N40bn of 14.50 per cent Federal Government of Nigeria July 2021; 12.50 per cent FGN January 2026; and 12.40 per cent FGN March 2036 bond instruments, accordingly.

Bearish sentiments pervaded the treasury bills market, as average Treasury bills yield pared by 1.18 per cent to settle at 17.72 per cent. Also, in the Treasury bonds space, investors signalled strong appetite towards the shorter-term bond instruments.

Consequently, average bond yield declined marginally by 0.03 per cent to settle at 16.12 per cent at the end of the trading week.

At the interbank foreign exchange market, the naira depreciated by 1.06 per cent to settle at N307.77/dollar at the close of the week.

But the naira appreciated by 2.83 per cent to close at N460/dollar in the parallel market. Average forward quote stood at N324.83/dollar at the close of the week.

To this end, analysts at Vetiva Capital Management Limited, said, “As the Q3 earnings season opens up further, we expect trading activity to pick up as investors position ahead of the numbers.”

For the fixed income market, they said with no inflows expected at the start of the week to ease system liquidity, “we expect the upward trend in yields to persist.

“For the currency, we do not rule out the possibility of the naira strengthening further as the impact of the CBN’s directive further unfolds.”

For banking stocks, the Meristem analysts said the gain recorded last week was due to the bargain-hunting activities on ‘tier 1’ banks that had witnessed poor market sentiments in the prior week. “As we enter the earnings season, we anticipate nine-month 2016 results to dictate market performance in the period,” it added.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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