Economy
Strong Job Growth Dampens Hopes for Interest Rate Cut
By Investors Hub
The major U.S. index futures are currently pointing to a lower opening on Friday as trading is set to resume following the Independence Day holiday on Thursday.
Stock futures came under pressure following the release of a Labor Department showing a substantial reacceleration in the pace of U.S. job growth in the month of June.
The report said employment surged up by 224,000 jobs in June after edging up by a downwardly revised 72,000 jobs in May. Economists had expected employment to increase by about 160,000 jobs.
While the data points to a rebound in the labor market following the weakness seen in May, the report has dampened investor hopes for a near-term interest rate cut by the Federal Reserve.
Stocks showed a strong move to the upside over the course of a holiday-shortened trading session on Wednesday. With the upward move, the major averages added to the modest gains posted on Tuesday to reach new record closing highs.
The major averages ended the session at their best levels of the day. The Dow jumped 179.32 points or 0.7 percent to 8,170.23, the Nasdaq advanced 61.14 points or 0.8 percent to 8,170.23 and the S&P 500 climbed 22.81 points or 0.8 percent to 2,995.82.
The strength on Wall Street came as a batch of largely disappointing U.S. economic data reinforced expectations for a near-term interest rate cut by the Federal Reserve.
Initial buying interest was generated in reaction to a report from payroll processor ADP showing private sector job growth reaccelerated in the month of June but still came in below economist estimates.
ADP said private sector employment climbed by 102,000 jobs in June after rising by an upwardly revised 41,000 jobs in May.
Economists had expected employment to increase by about 140,000 jobs compared to the addition of 27,000 jobs originally reported for the previous month.
“Even with the US-China trade talks back on track (for now at least) the evidence of a slowdown in employment growth should still be enough to persuade the Fed to cut rates in either July or September,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.
CME Group’s FedWatch tool shows an interest rate cut of at least 25 basis points at the Fed’s July meeting is priced into the markets, although Ashworth said expectations of a 50 basis point cut “seem misplaced.”
Stocks saw further upside after a report from the Institute for Supply showing a notable slowdown in the pace of service sector growth added to the optimism about a rate cut.
The ISM said its non-manufacturing index dropped to 55.1 in June from 56.9 in May, hitting its lowest level since a matching reading in July of 2017.
While a reading above 50 still indicates growth in service sector activity, economists had expected the index to show a more modest decrease to 55.9.
A separate report released by the Commerce Department showed the U.S. trade deficit widened by more than anticipated in the month of May, as the value of imports jumped by much more than the value of exports.
The Commerce Department said the trade deficit widened to $55.5 billion in May from a revised $51.2 billion in April. Economists had expected the trade deficit to widen to $54.0 billion.
The wider trade deficit came as the value of imports surged up by 3.3 percent to $266.2 billion compared to a 2.0 percent jump in the value of exports to $210.6 billion.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the wider than expected deficit suggests net trade was a “slightly bigger drag on second-quarter GDP growth than we had previously anticipated.”
“Despite the recent ceasefire agreed between Presidents Donald Trump and Xi Jinping, we still think it is slightly more likely than not that the trade dispute with China will ultimately escalate further,” Hunter said.
He added, “The upshot is that net trade is likely to remain a modest drag on growth over the second half of this year, which we expect to compound a sharp slowdown in domestic demand growth.”
Interest rate-sensitive commercial real estate stocks turned in some of the market’s best performances on the day, driving the Dow Jones U.S. Real Estate Index up by 1.3 percent.
Significant strength was also visible among housing stocks, which would also benefit from lower interest rates. The Philadelphia Housing Sector Index climbed 1.1 percent to its best closing level in over a year.
Transportation, software and telecom stocks also saw notable strength, moving higher along with most of the other major sectors.
By Modupe Gbadeyanka
The federal government, the 36 states of the federation and the 774 local government areas have received N1.727 trillion from the Federal Accounts Allocation Committee (FAAC) for December 2024.
The funds were disbursed to the three tiers of government from the revenue generated by the nation in November 2024.
At the December meeting of FAAC held in Abuja, it was stated that the amount distributed comprised distributable statutory revenue of N455.354 billion, distributable Value Added Tax (VAT) revenue of N585.700 billion, Electronic Money Transfer Levy (EMTL) revenue of N15.046 billion and Exchange Difference revenue of N671.392 billion.
According to a statement signed on Friday by the Director of Press and Public Relations for FAAC, Mr Bawa Mokwa, the money generated last month was about N3.143 trillion, with N103.307 billion used for cost of collection and N1.312 trillion for transfers, interventions and refunds.
It was disclosed that gross statutory revenue of N1.827 trillion was received compared with the N1.336 trillion recorded a month earlier.
The statement said gross revenue of N628.972 billion was available from VAT versus N668.291 billion in the preceding month.
The organisation stated that last month, oil and gas royalty and CET levies recorded significant increases, while excise duty, VAT, import duty, Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and EMTL decreased considerably.
As for the sharing, FAAC disclosed that from the N1.727 trillion, the central government got N581.856 billion, the states received N549.792 billion, the councils took N402.553 billion, while the benefiting states got N193.291 billion as 13 per cent derivation revenue.
From the N585.700 billion VAT earnings, the national government got N87.855 billion, the states received N292.850 billion and the local councils were given N204.995 billion.
Also, from the N455.354 billion distributable statutory revenue, the federal government was given N175.690 billion, the states got N89.113 billion, the local governments had N68.702 billion, and the benefiting states received N121.849 billion as 13 per cent derivation revenue.
In addition, from the N15.046 billion EMTL revenue, FAAC shared N2.257 billion to the federal government, disbursed N7.523 billion to the states and transferred N5.266 billion to the local councils.
Further, from the N671.392 billion Exchange Difference earnings, it gave central government N316.054 billion, the states N160.306 billion, the local government areas N123.590 billion, and the oil-producing states N71.442 billion as 13 per cent derivation revenue.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.65 per cent gain on Friday, December 13, boosted by three equities admitted on the trading platform.
On the last trading session of the week, Okitipupa Plc appreciated by N2.70 to settle at N29.74 per share versus Thursday’s closing price of N27.04 per share, FrieslandCampina Wamco Nigeria Plc added N2.49 to end the session at N42.85 per unit compared with the previous day’s N40.36 per unit, and Afriland Properties Plc gained 50 Kobo to close at N16.30 per share, in contrast to the preceding session’s N15.80 per share.
Consequently, the market capitalisation added N6.89 billion to settle at N1.062 trillion compared with the preceding day’s N1.055 trillion and the NASD Unlisted Security Index (NSI) gained 19.66 points to wrap the session at 3,032.16 points compared with 3,012.50 points recorded in the previous session.
Yesterday, the volume of securities traded by investors increased by 171.6 per cent to 1.2 million units from the 447,905 units recorded a day earlier, but the value of shares traded by the market participants declined by 19.3 per cent to N2.4 million from the N3.02 million achieved a day earlier, and the number of deals went down by 14.3 per cent to 18 deals from 21 deals.
At the close of business, Geo-Fluids Plc was the most active stock by volume on a year-to-date basis with a turnover of 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with the sale of 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 million.
In the same vein, Aradel Holdings Plc remained the most active stock by value on a year-to-date basis with the sale of 108.7 million units for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with a turnover of 297.3 million units worth N5.3 billion.
By Adedapo Adesanya
The Naira appreciated further against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N1.50 or 0.09 per cent to close at N1,533.00/$1 on Friday, December 13 versus the N1,534.50/$1 it was transacted on Thursday.
The local currency has continued to benefit from the Electronic Foreign Exchange Matching System (EFEMS) introduced by the Central Bank of Nigeria (CBN) this month.
The implementation of the forex system comes with diverse implications for all segments of the financial markets that deal with FX, including the rebound in the value of the Naira across markets.
The system instantly reflects data on all FX transactions conducted in the interbank market and approved by the CBN.
Market analysts say the publication of real-time prices and buy-sell orders data from this system has lent support to the Naira in the official market and tackled speculation.
In the official market yesterday, the domestic currency improved its value against the Pound Sterling by N12.58 to wrap the session at N1,942.19/£1 compared with the previous day’s N1,954.77/£1 and against the Euro, it gained N2.44 to close at N1,612.85/€1 versus Thursday’s closing price of N1,610.41/€1.
At the black market, the Nigerian Naira appreciated against the greenback on Friday by N30 to sell for N1,650/$1 compared with the preceding session’s value of N1,680/$1.
Meanwhile, the cryptocurrency market was largely positive as investors banked on recent signals, including fresh support from US President-elect, Mr Donald Trump, as well as interest rate cuts by the European Central Bank (ECB).
Ripple (XRP) added 7.3 per cent to sell at $2.49, Binance Coin (BNB) rose by 3.5 per cent to $728.28, Cardano (ADA) expanded by 2.4 per cent to trade at $1.11, Litecoin (LTC) increased by 2.3 per cent to $122.56, Bitcoin (BTC) gained 1.9 per cent to settle at $101,766.17, Dogecoin (DOGE) jumped by 1.2 per cent to $0.4064, Solana (SOL) soared by 0.7 per cent to $226.15 and Ethereum (ETH) advanced by 0.6 per cent to $3,925.35, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
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