Economy
Optimism About Tax Reform May Lead to Strength on Wall Street
By Investors Hub
The major U.S. index futures are pointing to a higher opening on Thursday following the mixed performance seen in the previous session.
Early buying interest may be generated amid optimism about the outlook for tax reform after Senate Republicans cleared a key procedural hurdle.
The Senate voted 52 to 48 along party lines to begin formal debate on the GOP tax reform bill after negotiations convinced Republican holdouts to vote for the legislation.
The approval of the procedural motion sets the stage for a final Senate vote on the tax reform bill later this week, although some issues still need to be resolved.
Stocks turned in a mixed performance during trading on Wednesday following the broad based rally seen in the previous session. While the Dow climbed to a new record closing high, the tech-heavy Nasdaq showed a sharp move to the downside.
The major averages ended the day on opposite sides of the unchanged line. The Dow climbed 103.97 points or 0.4 percent to 23,940.68, the Nasdaq plunged 88.02 points or 1.3 percent to 6,824.34 and the S&P 500 edged down 0.97 points or less than a tenth of a percent to 2,626.07.
The pullback by the Nasdaq was partly due to profit taking, as traders cashed in on recent strength among tech stocks amid concerns the companies won’t see as much of a benefit from proposed tax reform.
Semiconductor stocks showed a particularly steep drop, dragging the Philadelphia Semiconductor Index down by 4.4 percent. The index pulled back further off the record closing high set last Friday.
Micron Technology (MU), Lam Research (LRCX), and Applied Materials (AMAT) turned in some of the semiconductor sector’s worst performances on the day.
Electronic storage, software, and internet stocks also saw significant weakness within the tech sector, moving lower along with gold stocks.
On the other hand, transportation stocks showed a strong move to the upside, adding to the gains posted in the previous session. The Dow Jones Transportation Average surged up by 3.3 percent to a record closing high.
Expedia (EXPD), CSX Corp. (CSX), Southwest Airlines (LUV), and Norfolk Southern (NSC) posted standout gains on the day.
Banking stocks also extended the rally seen on Tuesday, driving the Dow Jones Banks Index up by 2.6 percent. The index reached its best closing level in almost ten years.
The continued strength among banking stocks reflected optimism about tax reform as well as Federal Reserve Chair nominee Jerome Powell’s comments calling financial regulations “tough enough.”
The mixed performance on Wall Street came as traders digested outgoing Fed Chair Janet Yellen’s testimony before the Congressional Joint Economic Committee, which further solidified expectations the Fed will raise interest rates next month.
In prepared remarks, Yellen said economic growth appears to have stepped up from its subdued pace early in the year.
“The economic expansion is increasingly broad-based across sectors as well as across much of the global economy,” Yellen said.
She added, “I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen further, supporting faster growth in wages and incomes.”
Yellen noted inflation has continued to run below the Fed’s 2 percent target but said recent lower readings on inflation likely reflect transitory factors.
“With the minutes from the Fed’s November meeting revealing that most officials still share Yellen’s view that the recent weakness of inflation will prove transitory, a December rate hike still looks the most likely outcome,” said Andrew Hunter, U.S. economist at Capital Economics.
On the U.S. economic front, the Commerce Department released a report showing stronger than previously estimated economic growth in the third quarter.
The report said real gross domestic product surged up by an upwardly revised 3.3 percent in the third quarter compared to the originally reported 3.0 percent jump. Economists had expected the increase in GDP to be upwardly revised to 3.2 percent.
With the bigger than expected upward revision, the GDP growth in the third quarter is now stronger than the 3.1 percent increase seen in the second quarter.
A separate report from the National Association of Realtors showed a much bigger than expected increase in pending home sales in the month of October.
NAR said its pending home sales index surged up by 3.5 percent to 109.3 in October after dipping by 0.4 percent to a downwardly revised 105.6 in September. Economists had expected pending home sales to climb by 1.0 percent.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
By Adedapo Adesanya
Nigerian billionaire investor, Mr Femi Otedola, has announced plans to invest $100 million in the Dangote Refinery, which plans to list later this year.
Mr Otedola disclosed this on Wednesday after leading a delegation of top executives from First HoldCo on a visit to the Dangote refinery.
“On a personal note, I’ve appealed to him (Aliko Dangote). I’ve been here with him 25 times, so my compensation is he’s going to allocate to me shares worth $100 million in the private placement,” the billionaire said.
Mr Otedola had previously denied that he had any stake or funded the construction of a 650,000 barrels per day facility.
The announcement marks his next big move after increasing his stake in First Holdco as well as buying a $10 million property in London.
Mr Dangote last year said the refinery could sell up to 10 per cent stake in the listing, which is valued at about $5 billion. It is aiming for a valuation of up to $50 billion for Dangote refinery.
The billionaire is planning to make the IPO a cross-border listing to enable the refinery to draw investments from domestic and international investors.
Mr Dangote, this week, said the IPO is designed to democratise wealth creation and give Africans direct access to participate in the continent’s industrial transformation.
On his part, Mr Dangote, president of the Dangote Group, says the company is targeting a private placement of about $2 billion for the refinery.
While the actual date for the IPO is yet to be announced, Mr Otedola’s early investment indicates value and could spur other high-net-worth individuals to show interest.
Mr Otedola, an ally of Mr Dangote, led top executives of First HoldCo on a tour of the refinery and the fertiliser plants in the Lekki free trade zone area.
The team also visited key project sites such as the jetty, a facility built by Dangote industries to receive large vessels.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange further chalked up 0.32 per cent on Wednesday, May 20, spurred by price appreciation in 11 Plc, and Central Securities and Clearing System (CSCS) Plc.
11 Plc, which used to be known as Mobil, added N22.11 to sell at N243.21 per unit compared with the previous day’s N221.10 per unit, and CSCS Plc gained N1.19 to trade at N71.81 per share versus Tuesday’s N70.62 per share.
The growth posted by the duo raised the market capitalisation by N8.04 billion to N2.495 trillion from N2.487 trillion, and lifted the NASD Unlisted Security Index (NSI) by 13.44 points to 4,171.19 points from 4,157.75 points.
Yesterday, there were two price losers, led by Nipco Plc, which shed N22.60 to close at N287.00 per unit compared with the preceding day’s N309.60 per unit, and FrieslandCampina Wamco, which lost 84 Kobo to sell for N150.95 per share, in contrast to the N151.79 per share it was traded a day earlier.
The volume of trades recorded at midweek dipped by 99.9 per cent to 2.3 million units from 1.9 billion units, the value of transactions fell by 93.7 per cent to N334.2 million from the preceding session’s N5.3 billion, and the number of deals went down by 43.3 per cent to 34 deals from 60 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion sold for N6.5 billion, and CSCS Plc with 60.9 million units exchanged for N4.1 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units valued at N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
By Adedapo Adesanya
The Naira broke its weakening streak in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Wednesday, May 20, after it appreciated against the US Dollar by 53 Kobo or 0.04 per cent to trade at N1,373.34/$1, in contrast to Tuesday’s closing rate of N1,373.87/$1.
The domestic currency also improved its value against the Euro in the official FX market during the midweek session by N1.99 to close at N1,592.53/€1 compared with Tuesday’s closing value of N1,594.52/€1, but depreciated against the Pound Sterling at the official FX market during the midweek session by 39 Kobo to trade at N1,840.00/£1 versus the previous day’s value of N1,839.61/£1.
Data from GTBank FX bench showed that the Naira appreciated against the Dollar yesterday by N2 to sell at N1,379/$1 versus N1,381/$1, but closed flat in the parallel market at N1,390/$1.
The performance of the local currency in the different segments of the forex market comes as the Central Bank of Nigeria (CBN) insisted that it is no longer aggressively intervening in the foreign exchange market to defend the Naira, as it held interest rate steady despite happenings in the global economy.
Governor of the apex bank, Mr Yemi Cardoso, disclosed after the Monetary Policy Committee (MPC) meeting in Abuja on Wednesday that the structure of Nigeria’s foreign exchange market has changed significantly under the ongoing reforms, adding that increased market liquidity has reduced the need for heavy intervention by the CBN.
Currency traders and investors are expected to continue monitoring CBN policy direction, foreign portfolio inflows, crude oil earnings, and external reserve performance as key indicators influencing the naira’s trajectory in the coming months.
According to Mr Cardoso, the CBN will continue with its current policy direction to sustain the fight against inflation and stabilise the exchange rate.
He described exchange rate stability as the centrepiece of the apex bank’s policy toolkit and stressed the need for stronger collaboration between monetary and fiscal authorities to reduce inflationary pressures in the economy.
As for the cryptocurrency market, it was in green on Wednesday as the US Securities and Exchange Commission (SEC) is delaying the launch of a recent wave of “novel ETFs,” including those that offer prediction-market style event contracts, to consider the implications of introducing the new products.
Prediction markets have become one of crypto’s hottest use cases over the past 18 months and now consistently record more than $15 billion in monthly trading volume across markets spanning from sports and elections to financial results and cultural events.
Dogecoin (DOGE) appreciated by 2.2 per cent to $0.1058, Solana (SOL) grew by 1.99 per cent to $86.42, Binance Coin (BNB) jumped 1.6 per cent to $652.01, TRON (TRX) rose by 1.4 per cent to $0.3604, Bitcoin (BTC) improved by 0.8 per cent to $77,769.62, Ethereum (ETH) soared by 0.5 per cent to $2,135.25, and Ripple (XRP) gained 0.5 per cent to quote at $1.37.
However, Cardano (ADA) dropped 0.4 per cent to trade at $0.2490, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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