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A Negative End to the Wee

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financial markets

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been another volatile week in financial markets but stocks are on course to end it in the red, with Europe down around 2% and US futures eyeing a weaker start.

This comes despite investors getting a pleasant surprise from PMIs across Europe, with the services sector, in particular, performing much better than expected as restrictions continued to be dropped. This wasn’t backed up by strength in manufacturing though which should bring caution as we go into a challenging period for the bloc.

The data from the UK is disappointing, to say the least. Gfk consumer confidence data overnight got us off to a bad start and the numbers that have followed for retail sales and services since were no better. The pound plunged below 1.30 against the dollar on the releases and remains more than 1% lower on the day. The cost-of-living crisis has arrived.

Macron favourite but investors wary of Le Pen surprise

The French second-round election this weekend is expected to be close although Emmanuel Macron has seen his lead in the polls widen in the days leading up to the second vote which may be providing him with some comfort. It is still expected to be much closer than the run-off between the two five years ago though and considering how populists have outperformed polls in recent years, no one is getting complacent.

The odds may massively favour the incumbent at this point but there is still a very real chance that Le Pen’s fans turn up on Sunday, more motivated to vote than those that simply oppose her more than Macron. That feeling was clearly stronger five years ago and the biggest risk for Macron is that those that oppose Le Pen more but voted for other candidates in the first round don’t show up.

Markets appear relatively calm going into the vote and the latest polls will be contributing to that. But that only increases the risk of a sharp knee-jerk reaction on the open Monday if Le Pen is victorious. Whether that would be sustained is hard to say. Remember, Trump and Brexit were perceived to be negative stock market events and in both cases, they bounced back quickly and went on to perform very well. The euro may be more vulnerable as Le Pen would no doubt be a disruptive force for the bloc.

Oil choppiness continues

Oil remains choppy with China and the Fed creating a bit more two-way price action amid very tight markets. The risks are certainly more tilted to the upside, given the war in Ukraine and a potential embargo on Russian exports, but lockdowns in China and the risk of a Fed-driven economic slowdown are also significant.

Central banks may be targeting a soft landing while belatedly combating very high inflation but that is very hard to achieve and there are plenty of reasons to believe they’ll fail to do so again. The economy is very strong, as is the labour market, but both can only sustain so much tightening in a short period and we may soon see whether the Fed has left itself too much to do.

A rough week for gold

After a bright start to the week that saw it come within a whisker of $2,000, gold is on course to end it around 2% lower following another negative session on Friday. It’s continuing to be weighed down by a stronger dollar and higher yields as traders anticipate an aggressive tightening cycle from the Fed.

High inflation and an uncertain economic environment have been very supportive for the yellow metal and I don’t expect that to change but the more tightening markets price in, the more resistance we’ll see gold rallies. Of course, that may change if recession warnings start flashing but as yet, there remains some confidence that this can be avoided. The 5/30-year bonds have inverted again which may cause some alarm but at the moment, the 2/10 spread remains positive, just.

Bitcoin delt another blow but sees support

Bitcoin swiftly reversed course on Thursday after enjoying an encouraging recovery from the lows earlier in the week. We’re continuing to see very choppy trading in bitcoin and what was perceived as hawkish commentary from Fed Chair Jerome Powell seems to have been blamed for the latest swing. Reports that EU officials discussed banning bitcoin trading due to concerns over its intense energy usage may have contributed to the declines. Bitcoin did see support around $40,000 which could once again be viewed as an encouraging sign.

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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Banking Sector

Buhari Expresses Confidence in Banking Institutions to Tackle Economic Challenges

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President Muhammadu Buhari

President Muhammadu Buhari has expressed his confidence in the West African Banking Association (WABA) to tackle economic challenges in the West African region.

The president expressed his trust while receiving a team from WABA, led by its President, Thierno Seydou Nourou Sy, at the State House in Abuja.

The president stated that the sub-region needs to come to an agreement on low access to financial services and recovery from the COVID-19 pandemic.

According to him, the association, founded in 1981, brings together over 250 commercial banks and 15 institutions from across West Africa, and for many centuries, African countries have traded with one another without a formalized and structured system. He, however, noted that over time, global trade had become more complex and organized.

The president expressed optimism that the launch of the African Continental Free Trade Area will mark a watershed moment in the way African countries do business.

“More importantly, we will turn the page in ensuring that we deepen and expand our industrial capabilities by making sure we export less of what we have been endowed with in the primary or raw form, and convert larger portions of these resources into finished materials.

“That will allow us to benefit from the revenue earned from the added value of exporting a finished product,” he said.

“Our ability to overcome the current phase of our development lies in our resolve to work jointly via our regional and sub-regional organizations where we can all reach a common understanding to fight against a common enemy.

“This is one of the reasons I am delighted with the strides ECOWAS has been making towards unanimity and forging alliances with a goal to resolve issues that confront the sub-region.

“I believe that this is also the approach that is being followed in the West African Bankers’ Association and the West African Monetary Union,’’ he added.

While commenting on WABA’s ongoing attempts to synchronize monetary and fiscal policy, the president pushed the organization to find common ground despite the particular macroeconomic challenges that each member-state faces.

He pledged that Nigeria would always be ready to support efforts that are geared towards improving the lives of all its citizens “as long as they do not place us at a disadvantage.”

The WABA President praised Nigeria’s leadership role in the African economy, while also praising President Buhari’s leadership.

“That’s why we are here for counsel and guidance for the financial sector in West Africa,” he said. He further urged the president to be an advocate for the greater inclusion of WABA in the ECOWAS structure.

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Finance

NGX Sheds 0.13% on Monday to Extend its Decline

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Stock - Investors King

The Nigerian Exchange Limited (NGX) extended its decline on Monday as investors exchanged 263,338,835 shares worth N3.549 billion in 4,549 billion.

The market value of all listed equities decreased by N37 billion from N28.562 trillion it closed on Friday to N25.525 trillion while NGX shed 0.13% to close at 52,911.51 index points on Monday.

Jaiz Bank led the most traded stocks with 114007816 shares worth N101,752,697.03. Followed by GTCO’s 12,872,851 shares valued N302,842,620.75. See other details below.

Top Gainers 

Symbols Last Close Current Change %Change
CONOIL N 31.15 N 34.25 3.10 9.95 %
MRS N 13.60 N 14.95 1.35 9.93 %
MCNICHOLS N 2.13 N 2.34 0.21 9.86 %
ACADEMY N 1.23 N 1.35 0.12 9.76 %
NPFMCRFBK N 1.87 N 2.02 0.15 8.02 %

Top Losers 

Symbols Last Close Current Change %Change
PRESCO N 200.00 N 180.00 -20.00 -10.00 %
GSPECPLC N 3.41 N 3.07 -0.34 -9.97 %
NEIMETH N 1.76 N 1.59 -0.17 -9.66 %
UACN N 14.40 N 13.20 -1.20 -8.33 %
NEM N 4.39 N 4.05 -0.34 -7.74 %

Top Trades

Symbols Volume Value
JAIZBANK 114007816.00 101752697.03
GTCO 12872851.00 302842620.75
TRANSCORP 12806324.00 16725610.46
ACCESSCORP 11657629.00 115657901.70
ZENITHBANK 8579430.00 207021363.25

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Finance

Nigeria Raises Interest Rate by 150 Basis Points to 13%

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) led Monetary Policy Committee on Tuesday unanimously agreed to raise interest rates by 150 basis points from 11.5% to 13% to rein in escalating consumer prices.

The apex Governor, Godwin Emefiele disclosed this while speaking to the media on Tuesday, May 24th, 2022.

In 2020, the committee cut interest by 50 basis points to 11.5% in September 2020 to encourage borrowing and deepen new investment to stir growth and halt the plunge in economic productivity during the peak of COVID-19.

The nine-member committee voted unanimously to keep Monetary Policy Rate (MPR) at 13% and others as follow:

  • The asymmetric corridor of +100/-700 basis points around the MPR was retained
  • CRR was retained at 27.5%
  • While Liquidity Ratio was also kept at 30%

The increase may not be unconnected to Nigeria’s high inflation rate of 16.82% in April. The committee is now projecting an aggressive increase in the inflation rate due to the forthcoming general election.

Emefiele said the MPC is suspicious “there might be an aggressive accretion of inflation”. Therefore, to prevent the looming inflation, he said the committee had to raise the interest rate by 150 basis points.

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