Stocks rebounded sharply in May 2020, the bulls stood strong in the market last week as trading indicators trended higher on positive reactions to corporate earnings and highly capitalized stocks that declared dividends despite the pandemic lockdown.
The Nigerian Stock Exchange All Share Index (NSE ASI) and the Market Capitalization increased by 1.80%, while the Year-to-Date return stood at -6.10%. The All Share Index closed at 25,204.75 against the previous close of 24,758.39 while Market Capitalization closed at ₦13.136 trillion against previous close of ₦12.903 trillion.
Last month April 6, 2020 the NSE ASI Year-to-Date return stood at -23.00% and on Friday May 22, 2020 the same NSE ASI y-t-d return gained to -6.10%, the gain was positioned of the investors taking advantage of listed companies releasing their Q1’2020 financials. This week, we expect the stock market to remain bullish as investors keep taking the position of the released financials.
Nigeria Inflation Rate Hits 2-Year High
Nigeria’s annual inflation rate rose to 12.34 percent in April 2020, the highest since April 2018, from 12.26 percent in the previous month. Food prices rose 15.03 percent, the most since March 2018, amid the coronavirus crisis. The inflation rate implies that a fast rise in the prices of overall goods and services in the economy, caused by the lockdown procedure in response to COVID-19 pandemic and the continual global oil crisis.
Oil Market Highlights
Nigeria’s economic activities have sharply declined over the last month, mainly due to the COVID-19 lockdown, as well as lockdowns imposed by other countries. The services sector received the biggest hit due to limited demand and falling consumption. The Central Bank of Nigeria composite PMI for the non-manufacturing sector dropped to 49.2 in March from 58.6 in February, indicating the first contraction in the services sector since April 2017. Meanwhile the manufacturing PMI expanded at its weakest level since April 2017 in March at 51.1 following 58.3 in February. Corresponding to the economic fallout, the sovereign credit rating has been downgraded by several rating agencies. Furthermore, the low oil price caused authorities to devalue the naira in March, and further adjustments are expected. Recently, the government gradually eased the country’s lockdown, but the rate of new infections remains high, which may impact both consumer and investor confidence and increase uncertainties in the short-term economic outlook.
According to secondary sources, total OPEC-13 preliminary crude oil production averaged 30.41 mb/d in April, higher by 1.80 mb/d m-o-m. Crude oil output increased mainly in Saudi Arabia, the UAE and Kuwait, while production decreased primarily in Angola, Nigeria, IR Iran and Iraq.
Just as it appeared that May might be a repeat of April, stocks turned higher with signs of a slowdown in COVID-19 infections, especially in Italy and US. Though jobless claims were breathtakingly high, they were expected, allowing investors to focus on positive developments. A more stable bond market also helped support the rally.
The stock market struggled to move higher, as a weak start to earnings season and troubling economic data created some underlying crosscurrents. The Dow Jones Industrial Average, which closed 4% and the S&P’s 500 Index rose by 0.24%, and the NASDAQ Composite surged 0.38%. European markets were lower, with declines in France (-0.02%), Russia (-148%), and the U.K (-0.37%).