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Market Data
Local
Global
*Data as of 6pm WAT
Market News
Local
Ibadan explosion traced to illegal miners’ explosives - Punch
The Oyo State Governor, Seyi Makinde, on Wednesday, said preliminary investigations by security agencies revealed that the explosion that rocked the Bodija Area of Ibadan, the state capital on Tuesday was caused by explosive devices stored by illegal miners.
FG saves N8tn from subsidy removal, FX reform - Punch
The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has said the Federal Government will be saving N8tn annually from the fuel subsidy removal and exchange rate unification policies
Shell Exits Nigeria’s Onshore After 88 Years - Leadership
Shell Plc has agreed to sell its Nigerian onshore oil and gas subsidiary, the Shell Petroleum Development Company of Nigeria Limited (SPDC), to a consortium of five companies known as Renaissance for a total of $2.4 billion, marking the end of Shell’s nearly century-long operations in Nigeria
NNPCL uncovers 83 illegal refineries, 22 suspects arrested - Punch
The Nigerian National Petroleum Company Limited says it has in the past one week uncovered no fewer than 83 illegal refineries in the Niger Delta.
Global
Homebuilder sentiment improves for second straight month - CNBC
US homebuilder sentiment surges back as mortgage rates drop, highest since September. Builders optimistic about market but warn of materials costs and land challenges. Single-family starts expected to rise in 2024, adding needed inventory. Regional results mixed, Northeast only area in positive territory.
Verizon to take $5.8 billion hit in fourth quarter from unit write down - Yahoo Finance
Verizon writes down $5.8 billion amid declining wireline business, cutting value of its Business unit due to fierce competition and economic pressure. Shares dip over 1%, reflecting the impact on company finances. Full results due January 23rd.
Market Commentary:
Overview:
The US dollar rose amid a more risk-averse mood and higher bond yields, with Fedspeak cooling rate cut hopes. AUD slid to 0.6585. Today’s calendar includes China Q4 GDP, UK December CPI, US December retail sales, and comments from ECB president Lagarde as the Davos forum continues.
Currencies/Macro:
The US dollar rose notably against all G10 currencies. EUR/USD fell from 1.0950 to 1.0863 – a one-month low. GBP/USD fell almost one cent, -0.7%, to 1.2635. USD/JPY rose from 145.75 to 147.31 – a six-week high.
The NY Fed manufacturing survey (Empire State) fell sharply to -43.7 in January (est. -5.0, prior -14.5) – a four-year low. Outsized declines in the previous two January surveys suggest a possible developing seasonal pattern. Weakness was notable in new orders and shipments.
Fed governor Waller offered detailed remarks on the Fed’s intentions to ease policy this year, pushing back on aggressive market pricing.
Canada’s CPI in December was in line with consensus, at -0.3%m/m and +3.4%y/y (prior 3.1%y/y). However, the key core measures rose, with trimmed mean at 3.7%y/y (est. 3.4%y/y, prior 3.5%y/y) and median at 3.6% (est. 3.3 %y/y, prior revised up to 3.6%y/y from 3.4%y/y).
Germany’s January ZEW investor survey showed expectations rising to +15.2 (est. 11.7, prior 12.8), but current conditions remaining pessimistic at -77.3 (est. -77.0, prior -77.1). The ECB’s consumer expectations survey showed a decline in inflation expectations, the 1yr to 3.2% (prior 4.0%) and the 3yr declined to 2.2% (prior 2.4%).
UK employment data showed unemployment remaining unchanged at 4.2% in November, with a fall in payrolls of -24k (est. -13k) in December. Average weekly earnings growth in November fell to 6.5%y/y (est. 6.8%, prior 7.2%).
Interest Rates:
The US 2yr treasury yield rose from 4.14% to 4.22%, with help from comments from Waller, while the 10yr yield rose from 3.94% to 4.05%. Markets currently price the Fed funds rate, currently 5.375% (mid), to be unchanged at the next meeting on 1 February, with a 60% chance of a cut in March.
Australian 3yr government bond yields (futures) rose from 3.70% to 3.76%, while the 10yr yield rose from 4.17% to 4.23%. Markets currently price the RBA cash rate to be unchanged at the next meeting on 6 February, with a 50% chance of a cut in June. New Zealand rates markets price the OCR, currently at 5.50%, to be unchanged on 28 February, with a 90% chance of a rate cut in May.
Credit spreads were mixed with Main little changed at 61, CDX moving in line with broader sentiment to be 1.5bp wider at 56, while US cash credit was unchanged as the market reopened and primary supply picked up, led by the banks.
Commodities:
Despite the US launching a third round of strikes against Houthi militant sites in Yemen in less than a week, a second commercial ship being hit by Houthi rebels in the Red Sea in the space of 24hrs plus both Shell and Mitsui OSK suspending shipments through the region, crude fell again with the February WTI contract down 0.6% to $72.23 while the March Brent contract is down 0.05% at $78.11.
Natural gas prices plunged the most in 10 months in the US with forecasts for warmer weather in the eastern half of the US. The February Henry Hub contract fell 14% Tuesday, the most since March with US stockpiles being more than 11% above the 5yr average.
Metals probed lower still with risk-off sentiment from rates markets weighing on prices. Copper is down 0.4% at $8,345 while zinc fell 0.2% to $2,553. However, aluminium managed a modest 0.4% bounce to leave it down 7.1% ytd at $2,214. Indonesia said it would inspect all of the country’s smelters after a deadly blast at a nickel facility owned by the Tsingshan Holding Group.
Iron ore showed some signs of stabilising after the 12% high to low correction over the last two weeks with chatter about an additional round of Chinese stimulus helping prices. The February SGX contract is up 45c at $128.70 while the 62% Mysteel index is up 50c at $129.25. Bloomberg reported that China is considering 1tn yuan of new debt issuance under the ‘special sovereign bond plan’ with the proceeds of the sale used to fund food, energy, supply chain and urbanisation projects. Rio reported a 2% drop in iron ore output in Q4 last year though China’s economy started to show signs of stabilising in Q4 with increased spending on infrastructure and manufacturing helping to offset prolonged weakness in the property sector according to the quarterly production report. China will report December Q4 GDP and IP data today including steel and aluminium production today and BHP will report its quarterly production data Thursday.
Day ahead:
Eurozone:
ECB President Lagarde speaks In Davos at 6:05 pm Syd. The final estimate for Europe’s December CPI is due, with the preliminary reading 2.9%yr overall, 3.4%yr core.
UK’s December CPI Likely to show sticky services inflation, with goods driving disinflation. Consensus for overall CPI is 3.8%yr, with the core rate 4.9%yr, services 6.1%yr.
US:
December retail sales are anticipated to show further gains after solid Black Friday sales (market f/c: 0.4%mth).
Industrial production in December is likely to be consistent with a subdued picture for manufacturing (market f/c: 0%mth).
Import prices index should show declines (market f/c: -0.5%mth). November business inventories should reflect an uncertain outlook limiting inventory accrual (market f/c: -0.1%mth).
The January NAHB housing market index is likely to indicate homebuilder sentiment is near historic lows.
The Federal Reserve's Beige Book provides an update on economic conditions across the country. Fed officials Barr, Bowman, and Williams are listed to speak.
The Week Ahead:
Monday:
Tuesday:
US Empire State Manufacturing Index fell twenty-nine points to -43.7
UK unemployment at 4.2% in quarter to December
Wednesday:
UK Consumer Prices Index (CPI) rose by 4.0% in the 12 months to December 2023, up from 3.9% in November
US core retail sales MoM came in at 0.4% vs 0.2% exp and 0.2% previously;
Thursday:
Unemployment Claims (US)
Friday:
Retail Sales m/m (UK)
Prelim UoM Consumer Sentiment (US)
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