Economy
US Shares Open Lower on Global Economic Concerns
By Investors Hub
The major U.S. index futures are pointing to a lower opening on Tuesday, with stocks likely to give back ground following the rally seen last week.
Concerns about the global economy are likely to weigh on the markets after the International Monetary Fund said the global expansion is weakening at a rate that is somewhat faster than expected.
The IMF lowered its forecasts for global economic growth to 3.5 percent in 2019 and 3.6 percent in 2020, 0.2 and 0.1 percentage points below last October?s projections.
An escalation of trade tensions and a worsening of financial conditions are key sources of risk to the outlook, the IMF said.
The IMF also expressed concerns about a bigger than expected slowdown in Chinese growth, the Brexit cliffhanger, and the ongoing U.S. government shutdown.
In remarks at the World Economic Forum in Davos, Switzerland, on Monday, IMF Managing Director Christine Lagarde noted risks to the global economy are increasingly intertwined.
?Think of how higher tariffs and rising uncertainty over future trade policy fed into lower asset prices and higher market volatility,? Lagarde said. ?This in turn contributed to tightening financial conditions, including for advanced economies, which is a major risk factor in a world of high debt burdens. ?
?Does that mean that a global recession is around the corner? The answer is ?no,?? she added. ?But the risk of a sharper decline in global growth has certainly increased.?
Extending the upward trend seen over the past several sessions, stocks moved sharply higher during the trading day on Friday. With the continued advance, the major averages reached their best closing levels in well over a month.
The major averages ended the day firmly in positive territory. The Dow soared 336.25 points or 1.4 percent to 24,706.35, the Nasdaq jumped 72.76 points or 1 percent to 7,157.23 and the S&P 500 surged up 34.75 points or 1.3 percent to 2,670.71.
Reflecting the four-day winning streak, the major averages moved substantially higher for the week. The Dow spiked by 3 percent, while the Nasdaq and the S&P 500 shot up by 2.7 percent and 2.9 percent, respectively.
The rally on Wall Street comes as traders continued to express optimism about trade talks between the U.S. and China.
Adding to the positive sentiment, a report from Bloomberg News said China has offered to go on a six-year buying spree to ramp up imports from the U.S.
An official familiar with the negotiations told Bloomberg that China would seek to reduce its trade surplus with the U.S. by increasing annual goods imports by a combined value of more than $1 trillion.
The Bloomberg report came on the heels of yesterday’s Wall Street Journal report indicating the U.S. is considering lifting tariffs on Chinese goods.
The Wall Street Journal report on Thursday said the U.S. is weighing easing tariffs in an effort to calm markets and give China an incentive to make deeper concessions.
People close to internal deliberations told the Journal that Treasury Secretary Steven Mnuchin proposed the idea of lifting some or all tariffs in a series of strategy meetings.
The people said the aim of easing the tariffs is to advance trade talks and win China’s support for longer-term reforms.
The positive news on trade overshadowed a report from the University of Michigan showing a substantial deterioration in U.S. consumer sentiment in the month of January.
The preliminary report said the consumer sentiment index plummeted to 90.7 in January from the final December reading of 98.3. Economists had expected the index to dip to 97.0.
With the much steeper than expected drop, the consumer sentiment index tumbled to its lowest level since hitting 87.2 in October of 2016.
“Consumer sentiment declined in early January to its lowest level since Trump was elected,” said Surveys of Consumers chief economist Richard Curtin. “The decline was primarily focused on prospects for the domestic economy, with the year-ahead outlook for the national economy judged the worst since mid 2014.”
He added, “The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies.”
Meanwhile, a separate report from the Federal Reserve showed industrial production increased by slightly more than expected in December, as jumps in manufacturing and mining output more than offset a sharp pullback in utilities output.
The Fed said industrial production rose by 0.3 percent in December after climbing by a downwardly revised 0.4 percent in November.
Economists had expected industrial production to edge up by 0.2 percent compared to the 0.6 percent advance originally reported for the previous month.
Oil service stocks moved sharply higher over the course of the trading session, driving the Philadelphia Oil Service Index up by 3.8 percent to its best intraday level in well over a month. The rally by oil service stocks came amid a significant increase by the price of crude oil.
Substantial strength was also visible among transportation stocks, as reflected by the 2.6 percent spike by the Dow Jones Transportation Average.
Trucking company J.B. Hunt Transport Services (JBHT) posted a standout gain after reporting better than expected fourth quarter results.
Computer hardware stocks also showed a significant move to the upside, resulting in a 2.6 percent jump by the NYSE Arca Computer Hardware Index.
Semiconductor, tobacco, banking, and networking stocks also moved notably higher, reflecting broad based buying interest.
By Dipo Olowookere
A 0.31 per cent gain was recorded by the Nigerian Exchange (NGX) Limited on Tuesday, helped by renewed bargain-hunting by investors, with the year-to-date return extending to 6.61 per cent.
It was observed that the growth achieved by Customs Street yesterday was supported by the banking and the industrial goods indices, which went up by 1.32 per cent and 0.69 per cent apiece.
They offset the losses recorded by the three other sectors, with the insurance counter down by 1.32 per cent, the consumer goods segment down by 0.23 per cent, and the energy space down by 0.17 per cent.
At the close of business, the All-Share Index (ASI) increased by 516.94 points to 165,901.57 points from 165,384.63 points and the market capitalization appreciated by N333 billion to N106.495 trillion from N106.162 trillion.
The market breadth index was positive yesterday after the bourse ended with 35 price gainers and 34 price losers, representing bullish investor sentiment.
The quartet of Industrial and Medical Gases (IMG), Union Dicon, Zichis, and Austin Laz chalked up 10.00 per cent each to sell for N34.65, N9.90, N5.06, and N4.07, respectively, while RT Briscoe appreciated by 9.95 per cent to N9.50.
On the flip side, Omatek lost 10.00 per cent to trade at N2.43, Cutix also fell by 10.00 per cent to N3.15, Union Homes shrank by 9.95 per cent to N76.90, Sunu Assurances declined by 9.94 per cent to N4.62, and Deap Capital crashed by 9.93 per cent to N7.62.
During the trading day, 736.4 million stocks worth N24.7 billion exchanged hands in 46,026 deals compared with the 762.8 million stocks valued at N18.4 billion traded in 55,374 deals a day earlier, indicating a rise in the trading value by 34.24 per cent, and a slip in the trading volume and number of deals by 3.46 per cent and 16.88 per cent apiece.
The activity chart was led by volume on the second trading session of the week by GTCO with 65.9 million equities valued at N6.5 billion, Chams transacted 55.7 million shares worth N249.8 million, Custodian Investment traded 49.8 million stocks for N2.2 billion, Universal Insurance sold 36.1 million equities valued at N51.5 million, and Zenith Bank exchanged 35.4 million shares worth N2.6 billion.
By Adedapo Adesanya
The oil market was up by nearly 2 per cent on Tuesday after the United States shot down an Iranian drone approaching an aircraft carrier and armed boats in the Strait of Hormuz, stoking concerns talks aimed at de-escalating US-Iran tensions could be disrupted.
This action caused the Brent futures to rise by $1.03 or 1.6 per cent to $67.33 per barrel, as the US West Texas Intermediate (WTI) futures jumped by $1.07 or 1.7 per cent to $63.21 a barrel.
Both crude benchmarks dropped more than 4 per cent on Monday after President Donald Trump said Iran was seriously talking with America.
However, the US military shot down an Iranian drone that “aggressively” approached the Abraham Lincoln aircraft carrier in the Arabian Sea on Tuesday.
In the Strait of Hormuz between the Persian Gulf and the Gulf of Oman, Iranian gunboats approached a US-flagged oil tanker in what US and British maritime security sources describe as a failed attempt to interfere with the vessel’s transit.
Members of the Organisation of the Petroleum Exporting Countries (OPEC) including Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The Strait of Hormuz, through which roughly a fifth of the world’s oil supply passes, remains Iran’s most obvious pressure point.
Despite the latest development, the UAE urged Iran and the US on Tuesday to use the resumption of nuclear talks this week to resolve a standoff that has led to mutual threats of air strikes. Iran, meanwhile, is demanding that talks be held in Oman not Turkey.
In Ukraine, President Volodymyr Zelenskiy accused Russia on Tuesday of exploiting a US-backed energy truce to stockpile munitions, and using them to attack Ukraine a day before peace talks. This boosted worries that Russia’s oil would remain sanctioned for longer.
On Monday, President Trump announced a trade deal with India, one of the world’s biggest economies and oil importers, on Monday to cut tariffs to 18 per cent from 50 per cent in exchange for the country halting Russian oil purchases and lowering trade barriers.
The American Petroleum Institute (API) estimated that crude oil inventories in the US decreased by 11.1 million barrels in the week ending January 30. Crude oil inventories decreased by 247,000 barrels in the week prior.
Official data from the US Energy Information Administration (EIA) will be published later on Wednesday.
By Adedapo Adesanya
The Africa Finance Corporation (AFC), the continent’s leading infrastructure solutions provider, has reiterated its commitment to playing a pivotal role to support transformative reforms in Nigeria’s power sector.
This is as it act as co-Financial Adviser to the Nigerian government on the successful issuance of the recent N501 billion inaugural tranche under the Presidential Power Sector Financial Reforms Programme (PPSFRP), as part of the N4 trillion Power Sector Bond Programme, aimed at resolving over a decade of legacy debt obligations in Nigeria’s electricity supply industry and restoring financial stability across the sector.
AFC provided comprehensive financial advisory services to the federal government, including the design of the Programme’s negotiation strategy framework, support in negotiating and executing Settlement Agreements with Power Generation Companies (GenCos), and structuring the bond issuance. Working in partnership with CardinalStone Partners as co-Financial Advisers, AFC deployed its deep sector expertise and strong local market knowledge to deliver the landmark transaction.
The programme was overseen by the Presidential Power Sector Debt Reduction Committee (PPSDRC), with technical leadership from the Office of the Special Adviser to the President on Energy, and implemented through NBET Finance Company Plc, a special purpose vehicle of Nigerian Bulk Electricity Trading Plc (NBET). Proceeds from the issuance will be used to settle verified, overdue receivables owed to GenCos for electricity supplied between February 2015 and March 2025, injecting liquidity into the power sector and extinguishing long-standing claims.
Commenting on AFC’s involvement, Mr Banji Fehintola, Executive Board Member and Head, Financial Services at Africa Finance Corporation, said: “The successful issuance of the inaugural tranche under the Power Sector Bond Programme underscores AFC’s commitment to supporting transformative reforms in Nigeria’s power sector. By resolving long-standing liquidity challenges and restoring confidence among investors and operators, this transaction lays the foundation for sustainable growth and improved electricity supply across the country.”
When fully implemented, the programme is expected to impact approximately 5,398MW of electricity generation capacity by Nigerian GenCos and finalise settlement for 290,644.84GWh of electricity billed since 2015. It will also strengthen companies serving about 12 million active registered customers, creating a solid platform for new investments in capacity enhancement and expansion.
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