Reaction to ECB Likely to Drive Trading on Wall Street
By Investors Hub
The major U.S. index futures are pointing to a modestly lower opening on Friday following the lackluster performance seen in the previous session.
Trading activity on the day may be somewhat subdued, with a lack of major U.S. economic data keeping some traders on the sidelines.
Uncertainty about the near-term outlook for the markets may also contribute to choppy trading following the recent move to record highs by the major averages.
Earnings news is likely to attract attention, however, with several big-name companies recently releasing the quarterly results.
Stocks showed a lack of direction over the course of the trading session on Thursday, with the major averages bouncing back and forth across the unchanged line. Despite the lackluster performance, the tech-heavy Nasdaq reached a new record closing high.
The major averages finished the day on opposite sides of the unchanged line. While the Nasdaq inched up 4.96 points or 0.1 percent to 6,390.00, the Dow dipped 28.97 points or 0.1 percent to 21,611.78 and the S&P 500 edged down 0.38 points or less than a tenth of a percent to 2,473.45.
The choppy trading on Wall Street partly reflected uncertainty about the outlook for the markets after the major averages reached new record closing highs on Wednesday.
Traders were also digesting the European Central Bank’s monetary policy decision, with the bank leaving its key interest rates unchanged.
The ECB also reiterated its plan to purchase 60 billion euros worth of government bonds and other assets each month through December, or beyond, if necessary.
Additionally, the ECB noted it stands ready to increase the program in terms of size or duration if the outlook becomes less favorable.
ECB President Mario Draghi indicated in his subsequent press conference that the asset purchase program would continue until there is a sustained adjustment in the path of inflation consistent with the bank’s target.
On the U.S. economic front, a report released by the Labor Department showed a much bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended July 15th.
The report said initial jobless claims fell to 233,000, a decrease of 15,000 from the previous week’s revised level of 248,000. Economists had expected jobless claims to edge down to 245,000.
The Federal Reserve Bank of Philadelphia also released a report showing that regional manufacturing activity grew at a notably slower rate in the month of July.
The Philly Fed said its index for current manufacturing activity in the region slumped to 19.5 in July from 27.6 in June.
While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to show a much more modest drop to 24.0.
Meanwhile, the Conference Board said its index of leading economic indicators rose by more than expected in the month of June.
The Conference Board said its leading economic index climbed by 0.6 percent in June after rising by a revised 0.2 percent in May. Economists had expected the index to rise by 0.4 percent
Telecom stocks showed a significant move to the downside on the day, dragging the NYSE Arca Telecom Index down by 2.1 percent. With the drop, the index fell to its lowest closing level in a year.
Communications chip maker Qualcomm (QCOM) posted a notable loss after reporting third quarter results that beat estimates but providing disappointing guidance.
Considerable weakness was also visible among trucking stocks, as reflected by the 2.1 loss posted by the Dow Jones Trucking Index. C.H. Robinson (CHRW) led the trucking sector lower after reporting second quarter earnings that came in below analyst estimates.
Railroad and oil service stocks also came under pressure on the day, while notable strength was visible among biotechnology and pharmaceutical stocks.
Within the biotech sector, Sarepta Therapeutics (SRPT) moved sharply higher after the biopharmaceutical company reported a narrower than expected second quarter loss.
Nigeria’s Debt Profile Jumps 17% to N46.25trn in 2022
By Adedapo Adesanya
Nigeria’s total public debt stock increased by 17 per cent to N46.25 trillion or $103.11 billion as of December 2022 from N39.56 trillion or $95.77 billion in 2021.
This information was revealed by the Debt Management Office (DMO) on Thursday.
This means that the country’s debt profile precisely increased by 16.9 per cent or N6.69 trillion or $7.34 billion within one year, as the government borrow funds from various quarters for its budget deficits.
The agency said the new figures comprise the domestic and external total debt stocks of the federal government and the sub-national governments (36 state governments and the Federal Capital Territory).
The DMO statement partly read, “As of December 31, 2022, the total public debt stock was N46.25 trillion or $103.11 billion.
“In terms of composition, total domestic debt stock was N27.55 trillion ($61.42 billion) while total external debt stock was N18.70 trillion ($41.69 billion).
“Amongst the reasons for the increase in the total public debt stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. The issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.
“On-going efforts by the government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.”
“The total public debt to gross domestic product (GDP) ratio for December 31, 2022, was 23.20 per cent and indicates a slight increase from the figure for December 31, 2022, at 22.47 per cent.
“The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and the 70 per cent limit recommended by the Economic Community of West African States,” the debt office said.
12-Month Treasury Bills Now 14.74% as Appetite Falls
By Dipo Olowookere
The 364-day treasury bills stop rate was raised by the Central Bank of Nigeria (CBN) at the primary market auction (PMA) on Wednesday by 5.25 per cent as appetite for the asset class waned.
The central bank, which conducted the exercise, did not record the usual hunger for the debt instrument by investors yesterday, ostensibly because of how the bank had tinkered with the rates in the previous exercises.
But the apex bank surprised subscribers at the PMA on Wednesday when it jerked the rate higher to 14.74 per cent from the 9.49 per cent it cleared in the previous PMA.
According to details of the exercise, the CBN auctioned the one-year bill worth N139.96 billion and received subscriptions valued at N165.28 billion, allotting N142.16 billion.
Business Post reports that it was not only the 12-month dated instrument that enjoyed the rate hike yesterday as the two others benefitted.
The central auctioned N3.34 billion worth of the 182-day bill during the session but had investors stake N1.56 billion on it, with N1.56 billion allotted to successful bidders at 8.00 per cent compared with the previous session’s 5.00 per cent, indicating an increase of 3.00 per cent.
As for the 91-day bill, the rate cleared at 6.00 per cent after it was moved higher by 3.45 per cent from 2.55 per cent. This was after the apex bank allotted N1.75 billion to subscribers, the same amount of bids it received from the N2.16 billion taken to the market on Wednesday.
Recall that some days ago, the Monetary Policy Committee (MPC) of Nigeria’s central bank increased the Monetary Policy Rate (MPR), which is the benchmark interest rate in the country, by 0.50 per cent to 18.00 per cent.
The team explained that the rate hike was mainly to tame rising inflation in Nigeria, which the National Bureau of Statistics (NBS) said stood at 21.91 per cent in February.
China’s Investment in Africa Has Cut Need for Loans from World Bank, IMF—Osinbajo
By Adedapo Adesanya
The Vice President of Nigeria, Mr Yemi Osinbajo, has lauded China’s investment in Africa, saying it has reduced dependency on loans from Bretton Woods, which consists of the World Bank and the International Monetary Fund (IMF).
In a statement seen by Business Post, the VP, at an event at King’s College London on March 27, 2023, stated that “China shows up where and when the West will not and or are reluctant.”
He said this was evident in the investment of the Asian giant in Africa, which he said stood at $254 billion in 2021, about four times the volume of US-Africa trade.
He also noted that, “China is the largest provider of foreign direct investment, supporting hundreds of thousands of African jobs. This is roughly double the level of U.S. foreign direct investment, adding that, “China remains by far the largest lender to African countries.”
He also noted that Chinese companies had taken the lead in exploiting minerals in Africa, many now in lithium mining in Mali, Ghana, Nigeria DRC, Zimbabwe and Namibia.
The Nigerian second-in-command said that China has always shown up for African countries while outrightly condemning Western countries in that regard.
He said, “Most African countries are rightly unapologetic about their close ties with China. China shows up where and when the west will not or are reluctant.”
He added, “And many African countries are of the view that the beware of the Chinese Trojan loans advise forming the west is wise but probably self-serving,” explaining that, “Africa needs the loans and the infrastructure. And China offers them. In any case, the history of loans from Western institutions is not great.”
Taking a step further, Mr Osinbajo sent a salvo to the World Bank and the IMF over the conditions attached to their loan facilities.
“The memory of the destructive conditionalities of the Bretton Woods loans is still fresh, and the debris is everywhere.
“And the preoccupation of western governments and media with the so-called China debt trap might well be an overreaction,” he added.
“I recommend an eye-opening lecture by Professor Deborah Brautigam about two weeks ago at Jesus College Cambridge.
“The truth, as she points out, is that all of the Chinese lendings to Africa is only 5 per cent of all outstanding public and publicly guaranteed debt in low and middle-income countries, compared to 23% held by the World Bank and other multilaterals.”
He alluded that Chinese lenders account for 12 per cent of Africa’s private and public external debt.
“And the Chinese have also been there when the debts cannot be paid. In early 2020 as COVID battered African economies, China came together with other G20 members to launch the Debt Service Suspension Initiative (DSSI).
“About 73 low-income economies benefited from the suspension of principal and interest payments. Chinese banks provided 63 per cent of the total debt relief while being only owed 30 per cent of the debt service payments due,” he quipped.
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