December 8, 2020/Cowry Asset Report
The global economy continued to expand for the fifth consecutive month in November as output, new orders and employment rates continued to grow. According to J.P. Morgan Global Composite Output Index, global business activities (manufacturing and services) expanded to 53.1points in November, slower than 53.1points in October.Nigeria’s foreign exchange reserves declined month-on-month by 0.77% to USD35.41 billion at the end of November despite increased crude oil prices over the same period (Bonny Light climbed m-o-m by 28.32% to USD48.45 a barrel). Consequently, Naira depreciated against the greenback in most forex market segments in November,expect at the interbank forex market where Naira gained 0.05% to average N38.79/USD.
Nigeria’s real Gross Domestic Product contracted y-o-y by 3.62% to N17.82 trillion in Q3 2020, albeit better than a 6.10% contraction printed in Q2 2020. The non-oil sector shrank y-o-y by 2.51% but grew by 12.36% q-o-q to N16.27 trillion.The oil & gas sector fell y-o-y by 13.89%, from a 6.63% contraction printed in Q2 2020; albeit, it grew q-o-q by 9.64% amid significant rise in the price of Bonny light in Q3 2020.The manufacturing composite PMI rose from contraction to 50.2 index points in November (from 49.4 in October). However, the non-manufacturing sector contracted to 47.6index points in November(albeit, slower than46.8index points in October).
In November, institutional investors continued to trade relatively safe assets, thus dragging short term stop rates and yields further south. At the secondary market, investor demand for T-bills remained strong, pushing Nigerian Interbank Treasury Bills True Yields (NITTY) to record lows–in tandem with primary markets top rates–such much so that NITTY for 1 month, 3 months and 6 months maturities fell into negative territory on November 172020; viz-0.092%, -0.069%and -0.037%respectively.
The Nigerian stock market rallied strongly in November, mainly due to increased domestic participation amid expectation of positive corporate releases in the Q3 earnings season and thinned-out yields in the fixed income space.
The global economy continued to expand for the fifth consecutive month in November as output, new orders and employment rates continued to grow. According to J.P. Morgan Global Composite Output Index, global business activities (manufacturing and services) expanded to 53.1points in November, slower than 53.1points in October.The consumer goods and investment goods categories saw faster growth rates;however, intermediate goods, business services and financial services saw slower growth rates while consumer services remained in negative territory, seeing output contract for the tenth month in a row.
The United States recorded relatively robust expansion in November as IHS Markit U.S. Composite PMI rose to 58.6points, faster than 56.3 points in October. Expansion in the US was broad-based as manufacturers and service providers both registered faster expansions; mainly driven by domestic demand(from new and existing customers). China’s expansion was also broad-based as the Caixin Composite Output Index rose to 57.5points in November from 55.7 points in October amid increase in business confidence and incoming businesses which contributed to steady rise in employment.However, the Eurozone fell into contraction territory as IHS Markit Eurozone Composite PMI pointed to 45.3 points in November (from 50points in October) amid fears of a second wave of the COVID-19 pandemic and as lockdown measures in the economic region intensified to contain the possibility of another outbreak.Services sector saw sharply reduced activity in contrast to sustained growth in the manufacturing sector.
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