Financial market update

25 May 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Nigeria’s GDP Dropped to 6.17% in Q1 according to the figures released by National Bureau of Statistic (NBS). The growth had largely been aided by the non-oil sector. The NBS, in its GDP report for the country covering 2011 and Q1 2012, stated that the first quarter of 2012 had been characterized by a decline in economic activities occasioned by the partial removal of subsidy on petrol and the subsequent civil protest and weak consumer demand following the higher price levels across major segments of the economy.

EUROPE: European stocks rebounded from the biggest drop in a month amid concern recent losses are overdone considering the outlook for company earnings. The Stoxx Europe 600 Index rose 1 percent to 241.91 at the close of trading yesterday. The benchmark gauge had retreated for three straight weeks, driving its valuation to 9.9 times estimated earnings, near the cheapest since January, according to data compiled by Bloomberg.

CHINA: China’s biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said. The drying up of loan demand attests to the severity of China’s slowdown and may add pressure on Premier Wen Jiabao to cut interest rates and expand stimulus measures.

UK: The U.K. economy shrank more than initially estimated in the first quarter after construction was revised to show a deeper slump, which may bolster the case for the Bank of England to restart bond purchases. Gross domestic product fell 0.3%, compared with a 0.2% decline estimated last month, the Office for National Statistics said yesterday in London. Construction output fell 4.8%, the most in three years and more than the 3% initially estimated, while services and production were unrevised. Net trade and inventories subtracted from GDP.

Bonds – Still very light trading in the bond market on Thursday. Markets traded flat on yields.

Bills – The CBN came out to offer N200billion in 42 & 56 day OMO bills in an attempt to mop up liquidity. Demand at the auction came in undersubscribed at N140billion with the CBN only selling N4.35billion very likely as a result of the high bids received. Volatility in the secondary market with the short end closing higher about 60-70bps while the long end closed the day relatively flat.

Money Market – OBB and unsecured O/N rates dropped 75bps to 11.25% yesterday as the system is awash with liquidity on the back of the inflow from the bond maturity of N245billion on Tuesday, the inflow from FAAC of approximately N280billion and the expectation of another N50billion in maturing bonds today. Expectation is that the CBN will keep coming out to offer OMO in an attempt to mop up this liquidity.

FX
Hi             Low           Close        Prev.Close
USD/NGN 160.50/60  159.35/45  159.90/00  159.35/45