May 26, 2025/United Capital Research
US equity markets reversed course last week, with the S&P 500 giving back over 50.00% of the previous week’s sharp rally. The Moody’s downgrade of US sovereign debt to Aa1 triggered a modest rise in long-dated yields, which became the primary source of equity volatility. Demand was soft for the 20-year Treasury auction midweek, causing it to “tail” (price below the pre-auction market). This added to the pressure on duration assets. The passage of the House’s expansive “One Big Beautiful Bill”, including tax cuts, increased defense spending, and higher deficits, briefly pushed long-end yields to multi-year highs before easing. Late in the week, fresh tariff threats from President Trump reignited trade tensions, suggesting that tariffs on EU could be raised to 50.00%, sending markets lower into Friday. The S&P 500 briefly retested its 200-day moving average, while every sector closed in the red. Energy stocks led losses as OPEC+ considers another production increase. Meanwhile, the US dollar index (DXY) fell by ~1.00%, weakening against both the euro and yen, as DXY tested the psychologically important 99 level.
By the same token, European equities ended broadly lower last week, with major indexes down between 1.00% and 2.00% w/w. France underperformed, dragged by sharp declines in luxury stocks, Hermès fell by 8.00% w/w, LVMH dropped by 5.00% w/w, and names like Essilor and Pernod Ricard lost ~4.00% w/w. Germany’s DAX, though down for the week by -0.60%, remains a standout performer year-to-date, up by 18.70% versus the S&P 500’s -1.50% YTD. Auto stocks were hit hard Friday after US President Trump reignited tariff concerns, sending the sector down by 3.00–5.00%. UK markets beat the regional trend, with the FTSE 100 finishing higher up by 0.40% w/w, led by gains in precious metals miners.
Asian markets posted a mixed performance, with Japan lower and China split between gains in Hong Kong and declines in Shanghai. Japan’s Nikkei lost 1.60% w/w amid rising JGB yields, which climbed after a weak 20-year auction sparked fears of tighter market conditions. The index slipped below its 200-day moving average and now sits just above its 100-day moving average, with further downside risk. In China, Hong Kong outperformed again, up by 1.10% on the week and 17.70% YTD, aided by battery giant CATL’s $5.00 bn public listing. However, CATL gave back some gains later in the week. Shanghai fell slightly, down by -0.60% w/w, as stronger-than-expected industrial output was offset by soft retail sales, reinforcing concerns around household demand. In India, equities finished modestly lower but rallied into week’s end on optimism surrounding a potential US trade deal.
Brent crude slipped by ~1.00% w/w (-0.50% on Friday), retreating after once again failing to break above its 50-day moving average $83.50/bbl. The 20-day moving average provided some technical support, helping limit downside. Prices came under pressure following reports that OPEC+ is considering a potential production increase, raising concerns about supply dynamics. However, escalating geopolitical tensions involving the US, Iran, and Israel offered a partial offset, keeping crude anchored within a narrow range.
This week, global markets will digest most of macro and micro catalysts amid thinner liquidity with US markets, which will be closed Monday for Memorial Day. In the US, attention will shift to Tuesday’s durable goods orders and consumer confidence, culminating with Friday’s PCE inflation, critical for Fed rate expectations. Monetary policy outlook could be refined further by the FOMC minutes on Wednesday and a slate of Fed speakers. Treasury auctions across the curve (2-year, 5-year, and 7-year) will also test demand. In Europe, inflation expectations and CPI prints from France, Germany, and Spain will shape ECB sentiment, with Lagarde speaking Monday. Asia will see key data releases from China and India, alongside a 40-year JGB auction and rate decisions from New Zealand and South Korea. Corporate earnings continue in force, headlined by Nvidia, Salesforce, and Dell, while the MSCI quarterly rebalance and Russell reconstitution preview could drive end-of-week flows. It is set to be a data-heavy week that may recalibrate market narratives on inflation, growth, and policy.
Macroeconomic Highlights
The Monetary Policy Committee of the CBN has retained the MPR at 27.50%, marking the second consecutive hold in 2025. This second pause in interest rates comes after six consecutive hikes in 2024.
A fresh wave of Premium Motor Spirit (petrol) importation into the country has made the row between oil marketers and the Dangote Petroleum Refinery to linger, amid signs of deepening tensions in Nigeria’s downstream oil sector. This row deepened after independent oil marketers resumed large-scale importation of petrol, as fresh data shows that over 496.17 million litres of petrol were brought into the country within nine days.
The oil and gas sector more than doubled its demand for foreign exchange in 2024, rising by $1.23bn (119.00%) y/y despite reduced fuel imports and efforts to boost domestic refining. The oil and gas sector utilised a total of $2.26bn in foreign exchange in 2024, compared to $1.03bn recorded in 2023.
The Dangote Petroleum Refinery has announced a fresh reduction in the pump prices of Premium Motor Spirit (petrol) across the country, as the competition in the downstream oil sector heightens. The plant announced that the new rates now range from N875 to N905 per litre, depending on location. The new price regime marks a N15 reduction per litre across all regions and partner retail outlets.
The total US imports from Nigeria declined by 20.00% in Q1-2025 bringing the total imports to $1.118bn in Q1 2025, down from $1.401bn in the same period in 2024. The trade data, published in the March edition of the US International Trade in Goods and Services report, revealed that the US imported $475m worth of goods from Nigeria in March 2025, a marginal increase from the $449m recorded in March 2024.
Foreign portfolio transactions on the Nigerian Exchange Limited declined sharply by 90.99% in April 2025, falling to N63.07bn from N699.89bn recorded in March, according to the latest Domestic and Foreign Portfolio Investment report released by the NGX. The sharp drop in foreign participation followed a surge recorded in March due to large block trades that significantly boosted foreign inflows. With the absence of such transactions in April, foreign investor activity slumped, accounting for just 13.08% of total market turnover for the month.
This week, we expect the National Bureau of Statistics to release the Q1-2025 Rebased GDP Report.
Domestic Equities: The Bears Regained Momentum…NGX-ASI Down by 0.62% w/w
Last week, the domestic equities market closed on a negative note as the bears dominated the market. Notably, share price depreciation in TRANSCOH (-15.03% w/w) pulled the main index lower. Also worthy of mention are sell offs in MTNN (-2.88% w/w), TRANSCOR (-4.38% w/w), ACCESSCO (-8.09% w/w), FIDELITY (-10.34% w/w) and OANDO (-6.73% w/w). As a result, the benchmark NGX-ASI declined by 62bps to close at 109,028.62 points, bringing the YTD return to a steady 5.93% and weakening market capitalization to N68.75tn. In terms of trading, market activity improved as the average value and volume of stocks traded rose by 17.24% and 50.87% to print at N14.96bn and 786.36mn units, respectively. Market breadth was positive however, investors’ sentiments declined to 1.27x (previously, 1.97x), 52 stocks appreciated while 41 depreciated.
Meanwhile, on a sectorial level, performance was Bullish as Three (3) out of the Five (5) sectors under our coverage closed in the green territory. The Consumer Goods sector (+2.18% w/w) led the gainers due to buy-interests in NESTLE (+19.50% w/w) and UNILEVER (+7.09% w/w). Following was the Insurance sector (+0.73% w/w) on the back of share price appreciation in LINKASSU (+17.60% w/w) and AIICO (+5.00% w/w). The Industrial Goods sector (+0.72% w/w) followed on the back of gains in WAPCO (+3.32% w/w) and BETAGLAS (+9.98% w/w). On the other side of the coin, the Oil and Gas sector (-3.44% w/w) led the laggards. Lastly, the Banking sector (-1.52%) followed owing to share price depreciation in ACCESSCO (-8.09% w/w) and FIDELITY (-10.34% w/w).
Looking forward, the equities market is likely to remain cautious and mixed next week, with limited upside. There might be pockets of buy interest in resilient corporates and value plays. Retail activity may support mid and small-cap stocks temporarily, but institutional follow-through will be limited due to potential participation at the upcoming bond auction. Market may stay within the current range barring any positive catalyst from the macros. Short-term traders might stay on the sidelines or move to fixed income for attractive yield. Investors may portray selective interest in defensive, rotating into consumer staples, telcos, and banks with solid outlooks. Overall, the outlook for the week is neutral to mildly bullish, with macroeconomic stability and corporate performance remaining key drivers.
Money Market: Stop Rates on the 365-day Bill Moderated Lower
Last week, the financial system opened with a surplus balance of N438.93bn. During the week, we observed increased activities in the Standing Deposit Facility (SDF) that boosted system liquidity, despite primary market sales conducted by the Apex Bank. That said, the financial system closed the week with a surplus balance of N431.87bn. Consequently, the average Open Repo Rate (OPR) and Overnight Rate (OVN) declined by 77bps w/w and 100bps w/w from 27.25% and 27.94% to settle at 26.48% and 26.94%, respectively.
At the 300th Monetary Policy Meeting held on the 19th and 20th of May 2025, the Monetary Policy Committee (MPC, or the Committee) decided to HOLD the Monetary Policy Rate (MPR) at 27.50%. Meanwhile, the policymakers maintained the Cash Reserve Ratio (CRR) at 50.00% and retained the liquidity ratio at 30.00%. Additionally, the Committee maintained the asymmetric corridor at +500/-100bps around the MPR. The Committee opted for a “wait-and-see” approach following several months of monetary tightening, giving credence to the notion that 27.50% is the Terminal Rate. For context, the MPC hiked the benchmark rate 6 consecutive times in 2024 from 18.50% to 27.50%.
The Central Bank of Nigeria (CBN) conducted an NT-bill auction with an offer size of N500.00bn across the 91-day, 182-day, and 364-day bills. At the auction, investors’ demand was strong, as total subscriptions printed at N1.17tn, indicating an oversubscription rate of 2.34x. The bids were majorly skewed towards the longer-tenured instrument, “364-day bill”, which received total bids of N1.05tn. Notably, the Apex Bank mildly oversold the auction, allotting a total of N615.80bn. That said, the stop rate on the 364-day bill declined by 7bps from 19.63% to settle at 19.56%. Meanwhile, the stop rates on the 91-day and 182-day bills remained unchanged at 18.00% and 18.50%, respectively.
In the secondary NT-bills market, we observed bullish sentiments as investors look to fill their unmet bids from the Primary Market Auction (PMA). As a result, the average yield on NT bills declined by 5bps w/w to close at 20.79% (previously, 20.84%). Similarly, the average yield on OMO bills fell by 37bps w/w to settle at 26.51% (previously, 26.88%).
This week, we expect the financial system to remain in the surplus region, supported by inflows from FAAC payments. As a result, we expect money market and FTD rates to remain at current levels, with the likelihood of inching lower. In the secondary market, we expect the bullish sentiments to be sustained as investors look to fill their unmet bids from the primary market. The HOLD decision by the MPC will continue to support downward pressure on rates in the fixed income market.
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 18.99% (previously, 19.03%). Similarly, activities were mainly bullish in the corporate bonds market, as the average yield on corporate bonds decreased by 7bps to settle at 21.90% (previously, 21.97%).
In the Nigerian secondary Eurobonds, bullish sentiments continued, albeit marginally, as investors cherry-picked instruments across the curve following the respite in the global market. Thus, the average yields in the market declined by 3bps w/w to settle at 9.76% (previously 9.79%).
Looking forward, we expect the Debt Management Office (DMO) to conduct the May-2025 bond auction with an offer size of N300.00bn across the reopened 2029 “5-YR” and 2033 “9-YR” papers. At the auction, we expect investors’ appetite to be mildly strong. In the secondary market, we project that mild bullish sentiments will persist. The outcome of marginal rates at the auction will significantly determine the direction of the market. 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 Q1-2025. 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 114bps w/w at the official market to close at N1,580.44/$, from its previous close of N1,598.72$. Similarly, the Naira appreciated by 62bps at the parallel market to settle at N1,610.00/$ from its previous close of N1,620.00/$. Lastly, Nigeria’s external reserves rose by 59bps to settle at $38.561bn (previously, $38.335bn).
This week, we expect the Naira to hover at current levels if there are no substantial shocks. 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.
