Tariff Policy Reprieve Sparks Global Rally and Return of Risk Appetite

US equities staged an impressive rally last week, driven by a decisive shift in sentiment following a surprise US-China tariff détente. President Trump’s announcement of a 90-day rollback in tariffs, reducing rates on both sides to near pre-escalation levels, sparked a broad risk-on move. The S&P 500 surged by 5.30% w/w, reclaiming its 200-day moving average and turning positive for the year (1.30% YTD). Gains were led by mega-cap tech, AI, and ICE semis, with the FANG+ and ICE Semiconductor indices soaring by 7.60% w/w and 9.90% w/w, respectively. The optimism was reinforced by resilient consumer signals (highlighted by Walmart’s earnings), a spate of M&A in the power sector, and softer inflation data. For context, annual CPI eased to 2.3% y/y in Apr-2025 vs 2.4% y/y in Mar-2025.  A plunge in the VIX below 20 level, the fastest such drop on record, underscored the strength of the rally. Moody’s post-close downgrade of US credit to Aa1 (from AAA) may dampen sentiment early this week. Nonetheless, the S&P’s “perfect week” capped a powerful rebound, but with macro risks still in play, the next test will be whether momentum can carry into the summer.

Similarly, European equities posted solid gains last week, with indices rising between 1.00% and 3.00% amid improved risk sentiment. The pan-European STOXX 600 advanced by 2.10% w/w, buoyed by signs of de-escalation in US-China trade tensions. Germany’s DAX rose by 1.14% w/w, France’s CAC 40 and Italy’s FTSE MIB outperformed, gaining 1.85% w/w and 3.27% w/w, respectively. The UK’s FTSE 100 added 1.52% w/w, supported by broad-based strength across sectors. Optimism around global trade and resilient earnings helped lift the region, even as investors remain cautious ahead of key macro and policy events in the weeks ahead.

Somewhere else, Asian markets posted mixed results last week, with early optimism around US-China trade developments fading as the week progressed. In Japan, the Nikkei 225 rose by 0.67% w/w and the TOPIX added 0.25% w/w, supported by the broader improvement in global risk sentiment after the US and China agreed to a temporary rollback of tariffs. Japanese officials continued to press Washington for a comprehensive review of remaining trade measures, particularly on automobiles. In China, equities rallied sharply to start the week as the tariff truce exceeded expectations and aligned closely with Beijing’s demands. However, gains were trimmed midweek as markets reassessed the likelihood of further stimulus, now less urgent considering easing trade pressures.

Oil started the week strong, rallying on bullish China headlines and testing recent highs near its 50-day moving average. However, gains faded after President Trump suggested progress on an Iran nuclear deal, pressuring prices back below $64.00/bbl. midweek. Crude ultimately recovered to close with a 2.30% w/w gain at ~$65.00.

In the week ahead, there will be a mix of macroeconomic and central bank catalysts. Globally, Flash PMIs on Thursday will headline the global data slate, alongside final Q1-2025 GDP figures in Europe. US Fed speakers will be active throughout the week, providing further post-CPI commentary. JP Morgan’s Investor Day opens the week, as the conference season kicks into gear, including JP Morgan’s European TMT Conference. Microsoft’s Build Conference and the Google I/O could also grip headlines. Markets still expect earnings releases from Home Depot, Toll Brothers, Target, Baidu, and Lowes, among others. Nonetheless, earnings season is tapering.

Macroeconomic Highlights

Nigeria’s inflation rate eased to 23.71% in April 2025, down from 24.23% recorded in March. This marks a modest decline of 0.52%. The country’s Core inflation stood at 23.39% in April 2025 on a y/y basis; it declined by 3.45% when compared to the 26.84% recorded in April 2024. Urban inflation stood at 24.29% y/y, 11.71 percentage points lower than the 36.00% recorded in April 2024.

World Bank has projected Nigeria’s inflation rate to average 22.10% in 2025 as the Central Bank’s tight monetary stance begins to anchor inflation expectations and restore confidence in macroeconomic management. According to the World Bank, while Nigeria’s economic indicators are showing signs of improvement, particularly growth, revenue, and fiscal balance, price pressures remain elevated.

The World Bank has also cautioned that Nigeria’s current economic growth rate may be too slow to meet the federal government’s ambitious target of transforming the country into a $1.00tn economy by 2030. According to the Bretton Woods institution, achieving this economic milestone will require a significant ramp-up in the country’s growth trajectory, by as much as fivefold.

CBN, in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS) has officially launched the Non-Resident Bank Verification Number (NRBVN) platform. The innovative digital gateway, which is projected to actualise the CBN’s $1.00bn monthly diaspora remittances target and about $12.00bn annually, allows Nigerians in the diaspora to obtain a BVN remotely without the need for a physical presence in the country. 

Nigeria has been formally admitted as a member of the European Bank for Reconstruction and Development (EBRD) to enhance private sector access to foreign capital. This development is expected to significantly boost private sector access to international capital in both foreign exchange and local currency, supporting the country’s long-term economic transformation.

According to the DMO, Nigeria’s total public debt rose by N57.30tn within the first 18 months of the current administration. The increase represents a 65.60% surge in the debt stock, growing from N87.38tn recorded at the end of June 2023 to N144.67tn as of December 2024. At the federal level, the total debt obligation — combining domestic and foreign borrowings — climbed from N78.21tn to N133.33tn, indicating that the Federal Government remains responsible for over 90.00% of the country’s total debt. 

This week, we expect the Monetary Policy Committee to have its 300^th MPC meeting, we also expect the National Bureau of Statistics to release the Q1-2025 Rebased GDP Report.

Domestic Equities: The Bulls Maintained Momentum…NGX-ASI Up by 0.90% w/w

Last week, the domestic equities market closed on a Positive note as the bulls dominated the market. Notably, share price appreciation in large cap stock OANDO (+20.65% w/w) pulled the main index higher. Also worthy of mention are buy interests in TRANSCOR (+5.95% w/w), TRANSCOH (+6.19% w/w), NESTLE (+10.00% w/w), ACCESSCO (+10.33% w/w) and NB (+12.94% w/w).  As a result, the benchmark NGX-ASI improved by 90bps to close at 109,710.37 points, bringing the YTD return to a steady 6.59% and strengthening market capitalization to N68.95tn. In terms of trading, market activity declined as the average value and volume of stocks traded fell by 17.14% and 1.48% to print at N12.76bn and 521.20mn units, respectively. Market breadth was positive however, investors’ sentiments declined to 1.97x (previously, 2.42x), 61 stocks appreciated while 31 depreciated.

Meanwhile, on a sectorial level, performance was Bullish as all Five (5) sectors under our coverage closed in the green territory. The Consumer Goods sector (+4.08% w/w) led the gainers due to buy-interests in NESTLE (+10.00% w/w) and NB (+12.94% w/w). Following was the Insurance sector (+2.47% w/w) on the back of share price appreciation in CORNERST (+15.00% w/w) and MANSARD (+4.78% w/w). The Banking sector (+1.19% w/w) followed on the back of gains in ACCESSCO (+10.33 w/w) and FIDELITY (+4.00% w/w).  The Oil and Gas sector (+0.66% w/w) followed on account of share price appreciation in SEPLAT (+0.33% w/w). Lastly, the Industrial Goods sector (+0.13%) followed owing to buy-interests in BETAGLAS (+46.31% w/w) and WAPCO (+2.31% w/w).

Looking forward, the equities market will be relatively dovish this week. On one side, investors expectation of the MPC action on Tuesday will make the equities market quiet at the start of the week. At mid-week, the NT-bills auction slated for Wednesday might switch investors’ attention from the equities market to the money market. Also, barring any tangible inflows, anticipated system deficit might decline buy-interest in the equities market. Nevertheless, there might be some pockets of buying activities arising from filing of impressive Q1-2025 results. Given the above, we advise PMs to adopt opportunistic approach taking advantage of intra-day gains in the equities market.

Money Market: Inter-bank Rates Increased

Last week, the financial system opened with a surplus balance of N294.23bn. During the week, we observed inflows from coupon payments worth a total of N143.13bn hit the financial system, boosting the existing liquidity. There were no mop-up or primary market activities, which left the financial system in a surplus region throughout the week. That said, the financial system closed the week with a surplus balance of N423.90bn. Consequently, the average Open Repo Rate (OPR) and Overnight Rate (OVN) climbed by 73bps w/w and 93bps w/w from 26.52% and 27.01% to settle at 27.25% and 27.94%, respectively.

In the secondary NT-bills market, we observed bullish sentiments as investors look to fill their unmet bids from the last Primary Market Auction (PMA). As a result, the average yield on NT bills declined by 13bps w/w to close at 20.84% (previously, 20.97%). Meanwhile, the average yield on OMO bills rose by 3bps w/w to settle at 26.88% (previously, 26.85%).

This week, investors’ attention will be fixed on the Monetary Policy Committee (MPC) meeting scheduled for the 19th & 20th of May. Key considerations for the Committee might include persistent inflationary pressure, Naira depreciation, capital flights, and global economic trends. The outcome of the meeting will be significant in determining the direction of the interest rate environment for Q2-2025. Meanwhile, the Central Bank is also expected to conduct an NT-bills auction across the 91-day, 182-day, and 364-day bills. Thus, we expect rates to remain at current levels with a possibility of tapering further.

Bond Market: Bullish Sentiments Persist Among Investors

The secondary bond market was relatively bullish, supported by the dovish outlook for the yield environment. Thus, the average bond yield fell marginally by 4bps to settle at 19.03% (previously, 19.07%). Similarly, activities were mainly bullish in the corporate bonds market, as the average yield on corporate bonds decreased by 4bps to settle at 21.97% (previously, 22.01%).

In the Nigerian secondary Eurobonds, we observed bullish sentiments return to the market as investors cherry-picked instruments across the curve following the respite in the global market. Thus, the average yields in the market declined by 60bps w/w to settle at 9.79% (previously 10.39%).

Looking forward, we expect investors to maintain a standoffish approach in the secondary bonds market as they await the outcome of the MPC’s meeting which will potentially influence the yield environment. However, we believe that the bearish undertone will continue as there is a chance that bond yields will likely remain around current levels for the rest of Q2-2025. Meanwhile, we expect the recent positive improvements in the global market to continue to drive bullish sentiments amongst investors in the Nigerian Eurobonds market.

Currency Market: Naira appreciated at the Official Market      

Last week, the Naira appreciated by 46bps w/w at the official market to close at N1,598.72/$, from its previous close of N1,606.64$. Similarly, the Naira appreciated by 62bps at the parallel market to settle at N1,620.00/$ from its previous close of N1,630.00/$. Lastly, Nigeria’s external reserves rose by 63bps to settle at $38.335bn (previously, $38.096bn).

This week, we expect the Naira to hover at current levels if there are no substantial shock.  We anticipate the CBN to continue to defend the Naira in the Foreign Exchange Market. Ultimately, CBN’s intervention would sustain the Naira at current levels with a possibility of marginal gains. However, we foresee that speculation, hoarding, insufficient supply of FX, high demand for FX, weak capital inflows, capital flight and low foreign investment, debt service pressure, weak FX earnings, corruption and negative real returns would continue to weaken the Naira in the FX market.