Wealth Wednessday
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Market Data
Local
Global
*Data as of 4pm WAT
Market News
Local
S/Africa May Displace Nigeria As Africa’s Biggest Economy – IMF - Daily Trust
The IMF suggests that South Africa could potentially replace Nigeria as Africa's largest economy. This forecast is based on changes in currency exchange rates, as the Nigerian naira depreciates relative to the South African rand. It's essential to consider, these projections are heavily influenced by FX and should not be misinterpreted as shifts in the two countries' economies
FG subsidized electricity with N135.23bn in Q2, 2023 – NERC - Vanguard
During the second quarter of 2023, the Federal Government of Nigeria subsidized the electricity sector with approximately N135.23 billion. This subsidy was provided to address shortfalls between the cost of electricity generation and the revenue collected by distribution companies, ensuring stability in the power sector.
Global
Gold rallies to near 1-month high after Gaza hospital strike - Reuters
Gold prices surged 1% as the Middle East conflict escalated. This increase in geopolitical tensions led to a rise in demand for the safe-haven precious metal, with investors seeking refuge amid the uncertainty in the region. The conflict in the Middle East has intensified concerns in the financial markets, pushing gold's value higher.
U.S. mortgage application flow plunges to lowest since 1995 - Reuters
U.S. mortgage applications plunged to a nearly three-decade low due to the sixth consecutive weekly rise in interest rates on popular home loans. The Mortgage Bankers Association's weekly index of mortgage application activity fell 6.9%, hitting 166.9, the lowest since May 1995.
Weekly Investment Watchlist
Market Commentary:
Asia - Pacific:
Asian equities finished mixed on Wednesday, with no clear direction apparent. Greater China stocks fell after a bright start, with the Hang Seng ending slightly lower again. Shenzhen underperformed, affected by the US tech ban, and Taipei was also sharply down ahead of several heavyweight earnings. However, Seoul ended slightly up. India extended early losses, Southeast Asia was lower overall, and Japan remained flat.
China released a host of macro data, most of which were better than expected. However, the imminent default of Chinese property developer Country Garden on bonds weighed down on markets, with property developer stocks falling to their lowest levels since 2009.
China’s GDP growth came in at 4.9% YoY, exceeding the expected 4.4%, though still lower than the 6.3% from July. Quarter-on-quarter GDP growth was 1.3%, significantly higher than the previous quarter’s 0.5%. China’s target for the year is 5%, and the market views this release as a positive step in that direction. However, it’s noted that strong stimulus measures may not be necessary as long as China is on track to achieve its 5% target.
Industrial production remained unchanged at +4.5%, and retail sales were higher at +5.5% compared to the previous month’s +4.6%.
There is a possibility of the Bank of Japan (BoJ) conducting unscheduled bond purchases on October 19, with JPY 100 billion of the 10Y-25Y JGB and JPY 300 billion of 5Y-10Y JGBs. The currency and market did not react significantly to this news.
Europe, Middle East, Africa:
European markets started the day higher but ended lower, following a positive boost from luxury stocks due to China’s retail sales data. The UK FTSE 100 dropped after steady inflation data that was slightly higher than consensus expectations.
UK inflation was a surprise on the upside in September, reaching 6.7% YoY versus the consensus of 6.6%, and the previous month’s figure of 6.7%. Core inflation rose by 6.1% YoY, surpassing the consensus of 6.0%, and the previous figure of 6.2%. Services inflation also edged up to 6.9% from the previous 6.8%. The firmer-than-expected data followed a much larger-than-expected drop in the August reading. Despite this, the consensus still expects a pause in rate hikes for the November meeting.
ASML’s Q3 results indicated that lower demand was affecting the industry. Q3 net bookings were weak, at €2.6 billion, with €500 million for EUV, compared to Q2 net bookings at €4.5 billion and EUV at €1.6 billion. It’s noteworthy that China represented 46% of total revenues. The company also reduced its FY 2024 guidance, with revenues expected to be flat, taking into account ongoing end-market weakness and new Chinese restrictions.
The Americas:
News that Nvidia has been banned from selling chips to China and potentially other countries significantly impacted the stock and mega-cap tech sector. Shares were down over 7% at one point and continued to trend lower in pre-market trading.
The NAHB Housing Market Index came in at 40, compared to the previously downward-revised figure of 44. Housing market data is showing signs of deterioration once again, with higher mortgage rates taking a toll on the industry. Building permits and housing starts data are expected today.
US Retail Sales proved to be a big surprise as the headline number rose 0.7% MoM, exceeding the estimate of 0.3%. Core retail sales (excluding autos) came in at 0.6% MoM, compared to the estimated 0.2%. The control group number came in at +0.61% MoM, and this is the number that drives GDP growth. It’s likely that this data will lead to an upward revision in 3Q GDP growth, which poses challenges for the Fed’s policy that may need to continue higher for longer with this level of economic growth.
Canada’s inflation statistics were better than expected. Headline CPI rose 3.8% YoY in September, below the consensus of 3.9% and down from the hotter-than-expected 4.0% reading in August. The deceleration was broad-based and driven by travel (air transportation down 21.1% YoY), durable goods, and groceries. This slowdown was offset by a larger year-on-year jump in gas prices (7.5% YoY versus 0.8% in August). Excluding gas, CPI rose by 3.7% YoY in September, compared to 4.1% in August.
The Week Ahead:
Monday:
Empire State manufacturing index dropped -6.5 points to -4.6 in October
Tuesday:
US retail sales up 0.7% in September
Wednesday:
CPI y/y (UK)
Thursday:
Unemployment Claims (US)
Friday:
Retail Sales m/m (UK)
Investment Tip of The Day
Assess Counterparty Risk in Derivatives: When trading derivatives, evaluate counterparty risk. Ensure that the entities with which you engage in derivative contracts are financially sound and reliable.
Meme of the Day
