Breakfast Report: The Week Ahead, Stock Watch & Recommendations

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The Week Ahead

Brent crude prices rose 6% last week to $57/bbl amid signs of thawing Market Performance w/w trade tensions between the U.S. and China and a decline in OPEC
production. News that U.S. and Chinese officials are set to meet today to resume trade talks bolstered sentiment in financial markets, as the tone from both parties has been warmer recently. The two largest economies had been encouraged to return to the table as a result of rising worries over global economic growth as a result of the trade war. Meanwhile, Reuters reports that OPEC production in December was down about 0.46 mb/d, thanks mostly to a c.0.4 mb/d slash in Saudi Arabian output, with Saudi officials promising further cuts in January, possibly exceeding the levels agreed by OPEC+ in December 2018. Finally, a U.S. Federal Reserve business activity index report revealed that U.S. shale activity was lower in Q4’18 as the industry became wary of lower oil prices, causing a deceleration in oil production growth, with WTI prices dipping as low as $42.53/bbl in December.

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Equity:

Driven by red closes across all key sectors, the ASI lost 43bps on Friday, taking w/w and YTD returns to -128bps and -252bps respectively. Investor sentiment has been tepid since the start of the year, indicated by weak market turnover and negative closes across counters. In the absence of a market stimulant, we foresee a continuation of investor apathy at the start of trading this week.

Stock Watch:

WAPCO has been on a downtrend in recent sessions, losing 10% last week alone. The stock last traded at ₦11.30 and is down 9% in 2019.

Fixed Income:

Following CBN’s monetary stance on liquidity controls, we do not foresee any significant demand in the treasury bills market this week. We also anticipate tepid trading in the bond space given reduced activity experienced last week.

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