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Trade Talks Uncertainty Weigh on Wall Street

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The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to give back ground following the rally seen last Friday.

Lingering concerns about the ongoing U.S.-China trade war may weigh on the markets ahead of the next round of high-level trade talks in Washington later this week.

Ahead of the talks, scheduled to begin on Thursday, a report from Bloomberg News said Chinese officials are signaling they?re increasingly reluctant to agree to the broad trade deal being pursued by President Donald Trump.

Citing people familiar with the discussions, Bloomberg said senior Chinese officials have indicated the range of topics they?re willing to discuss has narrowed considerably.

An offer from Chinese Vice Premier Liu He would purportedly not include reforming Chinese industrial policy or government subsidies.

The upcoming negotiations come as the trade war continues to hang over the economy, with a survey by the National Association for Business Economics showing 53 percent of economists see trade policy as the key downside risk to the economy.

The NABE said four out of five panelists believe that risks to the economic outlook are weighted to the downside, an increase from the 60 percent who held this view in June.

?The panel turned decidedly more pessimistic about the outlook over the summer, with 80% of participants viewing risks to the outlook as tilted to the downside,? said Survey Chair Gregory Daco, chief U.S. economist at Oxford Economics.

He added, ?The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to U.S. economic activity.?

Following the significant rebound seen over the course of the trading day last Thursday, stocks showed another substantial move to the upside during trading last Friday. With the rally, the major averages further offset the steep losses posted last Tuesday and Wednesday.

The major averages finished the session just off their best levels of the day. The Dow soared 372.68 points or 1.4 percent to 26,573.72, the Nasdaq surged up 110.21 points or 1.4 percent to 7,982.47 and the S&P 500 spiked 41.38 points or 1.4 percent to 2,952.01.

For the week, the major averages turned in a mixed performance. While the Nasdaq rose by 0.5 percent, the S&P 500 fell by 0.3 percent and the Dow slid by 0.9 percent.

The rally on Wall Street came following the release of a closely watched Labor Department report showing weaker than expected job growth but an unexpected drop in the unemployment rate to a nearly 50-year low.

The mixed data seemed to serve the dual purpose of reinforcing expectations the Federal Reserve will continue cutting interest rates while at the same offsetting concerns about a potential recession.

The report said non-farm payroll employment rose by 136,000 jobs in September compared to economist estimates for an increase of about 145,000 jobs.

Meanwhile, the increases in employment in July and August were upwardly revised to 166,000 jobs and 168,000 jobs, respectively, reflecting the addition of 45,000 more jobs than previously reported.

The average monthly job growth has still slowed from 223,000 jobs per month in 2018 to 161,000 jobs per month so far in 2019.

The Labor Department also said the unemployment rate fell to 3.5 percent in September from 3.7 percent in August. Economists had expected to unemployment rate to remain unchanged.

With the unexpected decrease, the unemployment rate dropped to its lowest level since hitting a matching rate in December of 1969.

The unexpected drop in the unemployment rate came as a 391,000-person jump in the household survey measure of employment more than offset an 117,000-person increase in the size of the labor force.

Even with the unemployment rate hitting a nearly 50-year low, the report said average hourly employee earnings edged down by a penny to $28.09 in September after rising by 11 cents in August.

Compared to the same month a year ago, average hourly earnings were up by 2.9 percent in September, reflecting a notable slowdown from the 3.2 percent increase in August.

Citing headwinds from weaker global growth, trade uncertainty and the strong U.S. dollar, ING Chief International Economist James Knightley expects job growth to average closer to 120,000 for the rest of the year.

“This suggests pay growth is unlikely to accelerate markedly from here and with inflation picking up, the real wage growth story may not be as positive for spending power,” Knightley said. “All in all, it looks as though the Fed will need to step in with more policy easing to support the economy.”

Stocks saw further upside in afternoon trading after Fed Chairman Jerome Powell described the U.S. economy as “in a good place,” and said it is the central bank’s job to “keep it there as long as possible.”

Gold stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Gold Bugs Index up by 2.1 percent. The rally by gold stocks came despite a modest decrease by the price of the precious metal.

Significant strength also emerged among semiconductor stocks, with the Philadelphia Semiconductor Index surging up by 1.9 percent.

Financial, housing, software, and healthcare stocks also saw considerable strength amid broad based buying interest on Wall Street.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Economy

Crude Oil Down on Steady US Energy Demand Forecast

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Crude Oil Loan Facility

By Adedapo Adesanya

Crude oil went down on Tuesday after a projection showed steady demand in the world’s largest oil producer, the United States, for 2025, Brent futures declining by $1.09 or 1.35 per cent to settle at $79.92 a barrel and the US West Texas Intermediate (WTI) crude losing $1.32 or 1.67 per cent to finish at $77.50 a barrel.

On Tuesday, the US Energy Information Administration said the country’s oil demand would remain steady at 20.5 million barrels per day in 2025 and 2026, with domestic oil output rising to 13.55 million barrels per day, an increase from the agency’s previous forecast of 13.52 million barrels per day for this year.

Also, the oil market shrank a few days after prices gained following new US sanctions on Russian oil exports to India and China.

On Monday, prices jumped 2 per cent after the US Treasury Department on Friday imposed sanctions on Gazprom Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called shadow fleet of tankers.

Analysts say this move could have a significant price impact on Russian oil supplies from the fresh sanctions, however, their effect on the physical market could be less pronounced than what the affected volumes might suggest.

ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrels per day surplus they had forecast for this year, but said the real impact could be lower.

Uncertainty about demand from China, the world’s largest oil importer, could impact tighter supply this year.

China’s crude oil imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.

Meanwhile, the American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 2.6 million barrels for the week ending January 10.

For the week prior, the API reported a draw of 4.022 million barrels in US crude oil inventories amid build season, while product inventories saw a hefty build.

In 2024, crude oil inventories dropped by more than 12 million barrels, according to the API’s inventory data. In the first few weeks of 2025, crude inventories have shed more than 6.6 million barrels.

Official data from the US EIA will be due later on Wednesday, confirming the actual level of stockpiles.

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Economy

Stock Exchange Suffers Heavy Loss as Investors Pull Out N1.1trn

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Local Stock Exchange

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited came under heavy selling pressure on Tuesday, going down by 1.66 per cent as investors embarked on profit-taking after most stocks on the trading platform gained in the past few trading sessions.

It was observed that the industrial goods sector was the most affected yesterday as it went down by 4.99 per cent due to the decline suffered by Dangote Cement and others.

The insurance continued its downward trend during the day as it lost 2.80 per cent, the consumer goods counter fell by 0.27 per cent, and the banking index shed 0.10 per cent, while the energy sector appreciated by 0.29 per cent.

At the close of business, the All-Share Index (ASI) deflated by 1,745.16 points to settle at 103,622.09 points compared with the previous trading day’s 105,367.25 points and the market capitalisation moderated by N1.1 trillion to finish at N63.188 trillion versus Monday’s N64.252 trillion.

Business Post reports that investor sentiment remained weak on Tuesday after the bourse ended with 41 depreciating equities and 23 appreciating equities, representing a negative market breadth index.

Honeywell Flour lost 10.00 per cent to trade at N9.54, Dangote Cement declined by 9.98 per cent to N431.00, Julius Berger crashed by 9.98 per cent to N139.80, Sovereign Trust Insurance decreased by 9.68 per cent to N1.12, and Prestige Assurance tumbled by 9.30 per cent to N1.17.

On the flip side, Northern Nigerian Flour Mills appreciated by 10.00 per cent to N45.10, Livestock Feeds grew by 9.91 per cent to N6.10, Academy Press expanded by 9.90 per cent to N3.22, University Press increased by 9.82 per cent to N4.81, and Neimeth gained 9.76 per cent to quote at N3.15.

During the session, market participants bought and sold 503.3 million shares valued at N12.6 billion in 12,900 deals compared with the 505.8 million shares worth N8.1 billion traded in 14,259 deals a day earlier, indicating a rise in the trading value by 55.56 per cent and a drop in the trading volume and number of deals by 0.49 per cent and 9.53 per cent, respectively.

The most active stock for the session was GTCO with 54.4 million units worth N3.2 billion, Nigerian Breweries transacted 32.2 million units for N1.0 billion, Universal Insurance traded 30.8 million units valued at N22.6 million, AIICO Insurance exchanged 26.6 million units worth N47.2 million, and Chams transacted 20.0 million units valued at N40.9 million.

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Economy

FG Offers 18% Interest on Savings Bonds

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FGN Savings Bonds

By Adedapo Adesanya

The federal government is offering two new savings bonds with interest rates between 17 and 18 per cent through the Debt Management Office (DMO).

In a statement by the agency, the country said retail investors can purchase the two-year bond maturing in January 2027 at 17.23 per cent interest, while the three-year paper maturing in January 2028 at a coupon rate of 18.23 per cent.

Bonds are very safe financial instrument that serve as investments because they are backed by the federal government, which promises to pay back the money.

According to the DMO, people can buy these bonds starting January 13, 2025, until January 17, 2025, with allotment expected on January 22, 2025, and the interest to be paid to investors every three months – in April, July, October, and January.

These bonds have some special features. They are tax-free under both company and personal tax laws.

Big investors like pension funds and trustees are allowed to buy them and each bond costs N1,000 each.

However, interested investor can only  buy at least N5,000 worth, and can’t buy more than N50 million.

This comes after the Ms Patience Oniha-led debt office said the Nigerian government was offering three bonds worth N150 billion in September 2024.

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