Finance Friday
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*Data as of 6pm WAT
Market News
Local
NNPCL/Total Energies joint venture achieves zero gas flare - Punch
The Nigerian National Petroleum Company Limited/TotalEnergies joint venture has achieved zero routine gas flare in all its assets, NNPCL announced on Thursday. It said the achievement was in pursuit of meeting the targets of 20 per cent (unconditional) and 47 per cent (conditional) greenhouse gas emission reduction as contained in the Nationally Determined Contribution under the Paris Accord signed by the President Bola Tinubu administration
NIMASA’s modular floating dock for installation - The Nation
The Nigerian Maritime and Safety Administration (NIMASA) said yesterday that it has commenced preparations to deploy the multi-million dollar modular Modular Floating Dock for installation by moving the facility to a jetty at the Standard Flour Mills in Apapa.
Tinubu to Inaugurate Lagos Red Line Rail February 29 - This Day
The much-anticipated Red Line Mass transit train would be inaugurated by President Bola Tinubu on February 29, Lagos State Governor, Mr. Babajide Sanwo-Olu disclosed yesterday. The Governor who made the disclosure at the Lagos State Parking Authority (LASPA) Stakeholders’ Forum 2024, held in Lagos, said it would help ease the traffic situation in the state.
CBN limits IOC home remittance of forex proceeds to 50% - BNR
The Central Bank of Nigeria (CBN) has stopped international oil companies (IOCs) operating in Nigeria from immediately remitting 100% of their forex proceeds to their parent company abroad. This was stated in the apex bank circular signed by Director Trade and Exchange, Hassan Mahmud where it said that the practice known as “cash polling” has an impact on liquidity in the domestic forex market.
Global
Japan slips into a recession and loses its spot as the world's third-largest economy - MSN
Japan’s economy is now the world’s fourth-largest after it contracted in the last quarter of 2023 and fell behind Germany. The government reported the economy shrank at an annual rate of 0.4% in October to December, according to Cabinet Office data on real GDP released Thursday, though it grew 1.9% for all of 2023. It contracted 2.9% in July-September. Two straight quarters of contraction are considered an indicator an economy is in a technical recession.
China Revives Socialist Ideas to Fix Its Real-Estate Crisis - WSJ
China’s massive property market is crumbling. Xi Jinping wants to revive socialist ideas about housing and put the state back in charge. Home prices across China are falling, developers have gone bust and people are doubting whether real estate will ever be a viable investment again. The meltdown is dragging down growth and spooking investors worldwide.
New OpenAI Technology Can Create Realistic Video From a Line of Text - WSJ
OpenAI has introduced new technology that uses artificial intelligence to create high-quality videos from text descriptions.
The company released short clips showcasing vivid, seemingly realistic videos, including woolly mammoths trekking across a snowy field, ocean waves crashing against a cliff’s shoreline and people doing everyday things like reading a book or walking down a city street.
Market Commentary:
Currencies/Macro:
On the day, the US dollar experienced a decline against all G10 currencies, with the most significant drop occurring after the release of disappointing retail sales data. The EUR/USD increased by 0.4% to 1.0770. The GBP/USD faced a dip due to weak UK GDP data but recovered alongside the general downtrend of the dollar, ending with a 0.25% increase at 1.2600. The USD/JPY dropped by 60 pips, or -0.4%, to 150.00.
The UK's Q4 GDP showed a contraction of -0.3% for the quarter and -0.2% for the year, against a consensus forecast of -0.1%, leading to some selling of sterling. This contraction follows a -0.1% decrease in Q3, placing the UK in a 'technical' recession.
In the US, January retail sales fell by -0.6% against an expected increase of +0.2%, with the core control group also down by -0.4% (expected +0.2%, from a previous +0.8%). January's industrial production decreased by -0.1%, compared to an expected increase of +0.2%, with the previous month's figure revised to 0.0% from +0.1%.
However, other economic indicators were more positive: January import prices increased by 0.8% against an expectation of 0.0%; the February Philadelphia Fed business survey index improved to +5.2, contrary to expectations of -8.1; and the February NAHB homebuilder confidence index rose to 48, above the forecast of 46. The NY Fed’s Empire State manufacturing survey for February showed an improvement to -2 from January’s significantly lower -44.
Weekly initial jobless claims came in at 212k, below the forecast of 220k, although continuing claims rose to 1895k from an expected 1880k.
The Atlanta Fed's GDPNow model adjusted its Q1 GDP growth prediction downward to 2.86% annualized, from 3.42%, due to decreased contributions from real personal consumption expenditure, real private domestic investment, and real net exports.
Interest Rates:
The yield on the US 2-year treasury experienced a round trip, initially dropping from 4.58% to 4.50% following the release of retail sales data, then returning to its starting point, while the 10-year yield fell to 4.18% on the data before climbing back to 4.24%. Market expectations for the Federal Reserve's funds rate, set at 5.375%, remain steady for the upcoming March meeting, but there's a consensus on a 100% probability of a rate decrease by June.
In the credit market, spreads showed strong performance, with the Main index tightening by half a basis point to 57. Meanwhile, the CDX index narrowed by 1.5 basis points to 52.5, reaching new series lows, and investment-grade (IG) cash spreads improved by 1-2 basis points despite ongoing issuance. In Europe, five issuers successfully priced a total of EUR 7.25 billion. In the US, six issuers brought to market USD 6.8 billion in corporate bonds, indicating robust activity in the corporate debt market.
Commodities:
Crude oil prices increased, buoyed by a risk-on sentiment following retail sales data, despite the International Energy Agency (IEA) issuing warnings about slowing demand. The March West Texas Intermediate (WTI) contract rose by 2.1% to $78.28, while the April Brent contract increased by 1.65% to $82.95. The IEA's February Oil Market Report highlighted a deceleration in global oil demand, with growth slowing from 2.0 million barrels per day (mbpd) in the third quarter of 2023 to 1.8 mbpd in the fourth quarter, including a significant drop in China. It also projected demand growth would further slow to 1.2 mbpd in 2024, down from 2.3 mbpd last year. On the supply side, January saw a sharp decline of 1.4 mbpd month-over-month due to an Arctic blast in North America and deeper OPEC+ output cuts, although non-OPEC+ supply is expected to increase thanks to record production from the US, Brazil, Guyana, and Canada. India is set to begin discussions on becoming a full IEA member, requiring oil stockpiles equivalent to 90 days of imports. The US Department of Energy (DOE) purchased an additional 2.95 million barrels of oil for the Strategic Petroleum Reserve (SPR) for June delivery, continuing efforts to refill the SPR.
Middle Eastern tensions and OPEC+ supply curbs countered the bearish outlook from the IEA. Hezbollah launched rockets into northern Israel, and Iraq and Kazakhstan committed to adhering to OPEC+ oil production targets, with Kazakhstan planning to offset its overproduction in the coming months. Russia nearly met its voluntary cut targets for the first time since pledging to do so last year.
In the gas market, the US House passed legislation to reverse the freeze on new LNG export plants, and the Federal Energy Regulatory Commission (FERC) approved the Oneok gas pipeline for exports to a Mexican terminal.
Metal prices also saw gains amid risk-on equity movements and news of BHP taking a $2.5 billion impairment charge on its Australian nickel assets. Copper increased by 1.5% to $8,322, and zinc by 2.3% to $2,365. Upcoming earnings reports from BHP, Rio Tinto, and others are anticipated next week.
The iron ore market experienced a rise during the Lunar New Year (LNY) holiday trade, with the March Singapore Exchange (SGX) contract increasing by 55 cents to $129.70. A planned strike by BHP train drivers was called off following an in-principle agreement.
Investment Tip of The Day
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