Economy
Upbeat Economic Data May Lead to Strength on Wall Street
By Investors Hub
The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to move back to the upside following the pullback seen late in the previous session.
Early buying interest may be generated in reaction to some upbeat economic data, including a report from the Commerce Department showing a much bigger than expected increase in retail sales in the month of May.
Meanwhile, traders are also digesting the European Central Bank?s highly anticipated monetary policy announcement.
Following its monetary policy meeting, the ECB announced plans to begin winding down its massive bond-buying program.
The ECB said it plans to reduce the monthly pace of its net asset purchases to 15 billion from 30 billion after September before completely ending the program at the end of December.
Meanwhile, the ECB left interest rates unchanged and said it expects rates to remain at their present levels at least through the summer of 2019.
?The ECB?s announcement that it will end its asset purchases in December is probably a little bolder than markets had expected, but this is tempered by the pledge to keep interest rates on hold for more than a year,? said Jennifer McKeown, Chief European Economist at Capital Economics.
Stocks saw modest strength for much of the trading session on Wednesday but came under pressure following the Federal Reserve’s monetary policy announcement. The Nasdaq reached a record intraday high but pulled back into negative territory along with the other major averages.
The major averages all closed in the red, although the tech-heavy Nasdaq edged down just 8.10 points or 0.1 percent to 7,695.70. The Dow slid 119.53 points or 0.5 percent to 25,201.20 and the S&P 500 fell 11.22 points or 0.4 percent to 2,775.63.
The pullback by stocks came after the Fed announced its decision to raise interest rates by 25 basis points to a range of 1.75 percent to 2 percent.
While the rate hike was widely expected, the Fed seemed to surprise investors by forecasting two additional rate hikes this year after previously predicting one rate increase.
“With growth rebounding following the typical first quarter soft patch, and inflation continuing to accelerate, we have been penciling in a total of four hikes for this year,” said ING economist James Smith. “Looking at the latest ‘dot plot,’ it seems the Fed is increasingly heading in this direction too.”
The Fed reiterated that it expects further gradual rate increases but dropped language predicting rates are likely to remain below levels that are expected to prevail in the longer run.
The central bank said data received since its May meeting indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.
Annual overall inflation and core inflation have moved close to 2 percent, the Fed said and noted indicators of longer-term inflation expectations are little changed.
On the U.S. economic front, the Labor Department released a report showing a bigger than expected increase in producer prices in the month of May.
The Labor Department said its producer price index for final demand climbed by 0.5 percent in May after inching up by 0.1 percent in April. Economists had expected producer prices to rise by 0.3 percent.
Excluding food and energy prices, core producer prices rose by 0.3 percent in May after edging up by 0.2 percent in April. Core prices had been expected to show another 0.2 percent increase.
The report said the annual rate of producer price growth accelerated to 3.1 percent in May from 2.6 percent in April, reaching its highest level in over six years.
The annual rate of growth in core producer prices also ticked up to 2.6 percent in May from 2.5 percent in the previous month.
“The rebound in producer price inflation in May supports our view that core consumer price inflation will trend higher over the rest of this year,” said Michael Pearce, Senior U.S. Economist at Capital Economics.
He added, “That will keep the pressure on the Fed to keep raising interest rates once a quarter over the next year or so.”
Housing stocks moved sharply lower over the course of the session, with the Philadelphia Housing Sector Index plunging by 2.9 percent. The steep drop by the index came after it ended the previous session at its best closing level in almost two months.
The pullback by housing stocks partly reflected concerns about the impact of higher interest rates following the Fed announcement.
Rate-sensitive commercial real estate stocks also came under pressure, dragging the Dow Jones Retail Index down by 2 percent. The index ended the previous session at a five-month closing high.
Telecom and chemical stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.
Economy
Wale Edun Rules Out IMF Loan for Nigeria
By Adedapo Adesanya
The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, has said Nigeria may not run to the International Monetary Fund (IMF) for any loan.
He disclosed this in a chat with Arise Television on the sidelines of the ongoing World Economic Forum (WEF) in Davos, Switzerland.
The Minister affirmed that Nigeria has no reason to approach the global lender, adding that the nation is currently relying on relatively cheaper borrowing sources from the World Bank and the African Development Bank (AfDB).
He also argued that Nigeria does not have a balance of payments problem and therefore will not need the short-term financing intervention by the Bretton Wood institution.
“I can imagine the headlines if you saw a situation whereby you were saying Nigeria approaches the IMF for funding. But the reality is that, of course, as a developing country, requiring investment, funds for the government, and investment in key infrastructure to improve the enabling environment for business, we do need funds, and we have the need to borrow.
“We have relied on relatively cheap funding from the multilateral, from the World Bank, from AFDB, and the whole spectrum of funding has been used.”
He also said that the country will tap a range of instruments to help finance this year’s budget deficit and improve the economy.
“We have relied on Nigerian savings by convincing them of the macroeconomic plan of the president, and what it holds in terms of the prospects for growth of the economy and business, and improvement of the business environment.
“Of course, we have approached the Euro bond market, which is, of course, the commercial end of financing. So we’ve done that whole spectrum. When it comes to IMF financing, typically financing from the IMF is to help with short-term balance of payments issues and crises.
“In the case of Nigeria, we have a positive trade balance. We have a positive current account balance. Our reserves are growing. The Governor of the Central Bank recently announced that we had achieved upwards of $10 billion improvement and increase in the reserves.
“We need to use equity. We need to rely on crowding in the savings, particularly of the private sector in Nigeria and the private sector around the world in the form of foreign direct investment. We have to remember that at this time, we have had significant gains in terms of improving the economic environment,” Mr Edun stated.
Economy
NASD OTC Exchange Rises 0.33%
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose further by 0.33 per cent on Thursday, January 23, as appetite for unlisted stocks continued to grow.
During the trading session, the value of the bourse went up by N7.6 billion to N1.767 trillion from the N1.76 trillion it closed in the preceding session, as the NASD Unlisted Security Index (NSI) made an additional 10.33 points to wrap the trading day at 3,120.3 points compared with the 3,09.80 points recorded at the midweek session.
Business Post reports that the share price of Okitipupa Plc increased on Thursday by N4.35 to end the day at N47.90 per unit compared with the previous day’s N43.55 per unit, and Food Concepts Plc gained 14 Kobo to settle at N1.74 per share, in contrast to the preceding day’s N1.60 per share.
On the flip side, Impresit Bakolori Plc suffered a decline of 10 Kobo yesterday to trade at 95 Kobo per unit versus Wednesday’s closing price of N1.05 per unit.
When the exchange closed for the session, the volume of securities bought and sold by investors went up by 70,008 per cent to 407.4 million units from the 581,160 units transacted a day earlier.
Equally, the value of shares traded during the session jumped by 16,665.9 per cent to N391.2 million from the N2.3 million recorded at midweek, and the number of deals increased by 65 per cent to 30 deals from the 20 deals posted on Wednesday.
Impresit Bakolori Plc topped the activity chart as the most active stock by value (year-to-date) with 406.5 million units worth N386.1 million, followed by FrieslandCampina Wamco Nigeria Plc with 4.3 million units valued at N170.4 million, and Geo-Fluids Plc with 9.1 million units sold for N44.3 million.
However, Impresit Bakolori Plc snatched the top spot as most active stock by volume (year-to-date) with 406.5 million units worth N386.1 million, as Industrial and General Insurance (IGI) Plc dropped to second position for selling 26.3 million units sold for N6.3 million, and Geo-Fluids Plc occupied third with 9.2 million units valued at N44.3 million.
Economy
Naira Firms to N1,548/$1 at Official Market, Tumbles at Black Market
By Adedapo Adesanya
The Naira recovered about 0.26 per cent or N3.99 against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, January 23 after coming under pressure in recent times.
During the session, the exchange rate of the local currency to its American counterpart closed at N1,548.59/$1 in the official market compared with the previous day’s N1,552.58/$1.
Also, against the Pound Sterling, the domestic currency gained N3.32 yesterday to trade at N1,912.21/£1 compared with Wednesday’s value of N1,915.53/£1 and on the Euro, it improved by N3.82 to sell for N1,617.72/€1 versus N1,613.89/€1.
The forex market may be reacting positively to news that the Central Bank of Nigeria (CBN) would launch a FX Code, which will serve as a guideline to the banking industry to promote ethical conduct of Authorised Dealers in the Nigerian FX market, next week.
The code will further reduce speculative activities, eliminate market distortions, and give the CBN improved oversight capabilities to effectively regulate the market.
The bank noted that authorised dealers would subsequently conduct all FX transactions in the interbank FX market on the EFEMS approved by the apex bank where transactions will be reflected immediately.
However, in the black market segment, the Nigerian Naira lost N5 against the greenback during the session to quote at N1,665/$1, in contrast to midweek’s rate of N1,660/$1.
As for the cryptocurrency market, it was lively yesterday as attention is increasingly centered on potential policy developments under the government of President Donald Trump of the US.
On Thursday, President Trump signed an executive order to ban the digital dollar and promote crypto and AI innovation in the country.
Meanwhile, the US data released recently showed the “all tenant rent” index, which leads the shelter inflation in the Consumer Price Index (CPI), rose at a slower pace last quarter. That has raised hopes that the US Federal Reserve will walk back on its hawkish December rate forecasts.
These helped Ethereum (ETH) gain 5.4 per cent on Thursday to sell at $3,394.79, Solana (SOL) appreciated by 4.4 per cent to $260.86, Cardano (ADA) jumped by 2.9 per cent to $1.00, and Litecoin (LTC) expanded by 2.6 per cent to $116.78.
Further, Bitcoin (BTC) rose by 2.1 per cent to $1o4,978.31, Ripple (XRP) leapt by 0.7 per cent to $3.16, Dogecoin (DOGE) increased by 0.6 per cent to $0.3572, and Binance Coin (BNB) soared by 1.6 per cent to $710.31, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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