Global Equities Rally as Policy Clarity Drives Sentiment.

US equities rallied last week, with the S&P 500 gaining 1.50% w/w to close just below the 6,000 mark. A decline in the VIX below 17, its lowest since February, supported a broad risk-on tone that favored growth stocks. The ICE Semiconductor Index surged by 6.10% w/w, and the NYSE FANG+ hit a new all-time high, gaining 2.70% w/w. The S&P Small-Cap 600 and S&P Mid-Cap 400 indices also outperformed, narrowing their YTD lag to -6.80% and -2.20%, respectively. However, defensive and yield-oriented sectors like consumer staples, REITs, and utilities underperformed. The consumer discretionary sector slipped modestly, dragged down by Tesla. Financials were mixed. Insurance and exchanges were weak, but banks found support from rising yields and renewed IPO activity. Notably, stablecoin issuer Circle raised over $1.0bn in a well-received NYSE debut.

Similarly, European equities posted solid gains, with the STOXX 600 up by 0.90% w/w and Germany’s DAX hitting another all-time high, extending its YTD rally to 22.10%, well ahead of the S&P 500’s 2.00% YTD gain. The Eurozone’s Q1-2025 GDP was revised higher, providing support ahead of the European Central Bank’s widely anticipated 25bps rate cut. However, the ECB signaled that it may be nearing the end of its easing cycle. While the broader market performed well, sector performance was mixed. Defense contractor Rheinmetall shares dropped by 5.00% on Friday but is still up nearly 200.00% YTD, and auto stocks were broadly weaker across the region.

By the same token, Asian markets ended the week mostly higher, led by strong gains in South Korea and Hong Kong. India surprised markets with a larger-than-expected 50bps rate cut (to 5.50%), boosting equities amid signs of slowing inflation. Conversely, in Japan, the Nikkei slipped by 1.10% w/w. While the government’s 10yr and 30yr bond auctions were met with healthy demand, a weak 40yr auction earlier in the week weighed on sentiment. China’s markets rose 1–2.00% as investors reacted positively to reports of renewed US -China dialogue following a phone call between Presidents Xi and Trump. However, China’s weak manufacturing PMI prints (less than 50), and rare-earth export developments added a cautious tone.

Looking at the oil market, Brent crude rallied by 5.90% w/w, including a 2.00% surge on Friday, closing above its 50-day moving average for the first time in weeks and marking its highest level since late April. Sentiment was buoyed by OPEC+’s weekend decision to gradually unwind voluntary production cuts, adding 411.00k bpd starting October, an outcome less aggressive than markets had feared. Geopolitical tensions, including ongoing Russia-Ukraine risks and stalled US-Iran negotiations, alongside Alberta wildfires, added to supply concerns and underpinned prices.

Markets enter the new week with a focus on inflation, big tech, and trade. All eyes will be on the US CPI and PPI prints, key inputs ahead of the US Fed’s June policy meeting. Globally, China’s inflation and trade data, along with UK employment and Japan’s GDP, will guide market sentiment. Meanwhile, the US Treasury auctions across the curve (3-month to 30-yr) could gauge demand amid ongoing fiscal concerns. On the corporate front, Apple’s WWDC and Nvidia’s GTC in Paris could potentially drive momentum in AI and tech stocks. While the Fed enters its blackout period on Monday, market participants will parse data for signals on the path ahead.

Macroeconomic Highlights

Global credit ratings agency, Moody’s has upgraded Nigeria’s sovereign rating from Caa1 to B3, highlighting substantial progress in the nation’s external and fiscal positions. This positive revision signals growing confidence in Nigeria’s economic stability and future outlook. In its statement, Moody’s emphasized the impact of recent changes in Nigeria’s foreign exchange management framework, saying it has improved the balance of payment.

Nigeria’s Business Performance Index (BPI) has maintained a positive performance streak for the fifth consecutive month this year which signals a positive outlook for private sector activities. The current BPI for May-2025 stands at +9.78 indicating mildly positive business activity, though slightly lower than the +12.29 in April-2025.

The Federal Government indicated that it has deepened its engagement with the Japan International Cooperation Agency (JICA) to advance the implementation of a ¥15bn (approximately $110mn) emergency loan facility aimed at strengthening Nigeria’s food security. This comes at a time when global supply chain disruptions and inflationary pressures continue to strain the nation’s agricultural sector. 

Nigeria’s private sector continued to expand in May, marking the sixth consecutive month of growth in business conditions even as businesses grapple with elevated inflationary pressures and, for the first time in six months, a dip in employment. The PMI, which is a key indicator of the private sector’s health, registered 52.7 in May. While remaining above the 50.0 no-change mark that signals improvement, this figure is down from 54.2 in April. This indicates a solid strengthening of business conditions over the month, but it was the least marked improvement since January.

Nigeria’s foreign exchange earnings from diaspora remittances may suffer a major blow following the passage of a new bill in the United States that seeks to impose a 3.50% tax on money transfers sent by non-citizens to recipients abroad. The provision is contained in the “One Big Beautiful Bill Act,” a sweeping legislative package by US President Donald Trump and recently passed by the US House of Representatives. If enacted into law, the remittance tax will apply to all international money transfers made by individuals who are not US citizens, including green card holders and temporary visa recipients. The tax is expected to be deducted at the point of transaction by banks and remittance platforms and remitted to the US Treasury on a quarterly basis.

This week, we expect the National Bureau of Statistics to release the Q1-2025 Rebased GDP Report.

Domestic Equities: The Bulls Maintained Momentum…NGX-ASI Up by 2.57% w/w

Last week, the market opened for four trading days as the Federal Government declared Friday 6-Jun-2025 and Monday 9-Jun-2025 as public holiday to commemorate 2025 Eid-el-Kabir celebration. As of close of market last week, the domestic equities market closed on a positive note as the bulls dominated the market. Notably, share price appreciation in large cap MTNN (+13.96% w/w) pulled the main index higher. Also worthy of mention are buy interests in DANGCEM (+2.27% w/w), FIRSTHLD (+17.60% w/w), OANDO (+25.77% w/w), GTCO (+4.55% w/w) and TRANSCOR (+4.41% w/w).  As a result, the benchmark NGX-ASI improved by 257bps to close at 114,616.75 points, bringing the YTD return to a steady 11.36% and strengthening market capitalization to N72.28tn. In terms of trading, market activity was mixed as the average value of stocks traded declined by 20.06% to print at N19.09bn. Meanwhile, the total volume of stocks traded rose by 5.90% to print at 803.49mn units, respectively. Market breadth was positive however, investors’ sentiments declined to 1.23x (previously, 1.27x), 53 stocks appreciated while 43 depreciated.

Meanwhile, on a sectorial level, performance was Bullish as Five (5) out of the Five (5) sectors under our coverage closed in the green territory. The Banking sector (+4.69% w/w) led the gainers due to buy-interests in ZENITHBA (+3.57% w/w) and UBA (+3.75% w/w). Following was the Insurance sector (+3.36% w/w) on the back of share price appreciation in CORNERST (+19.51% w/w) and WAPIC (+8.00% w/w). The Oil and Gas sector (+3.33% w/w) followed. The Consumer Goods sector (+2.33%) followed owing to share price appreciation in INTBREW (+12.89% w/w) and PZ (+11.86% w/w).  Lastly, the Industrial Goods sector (+1.18% w/w) followed on the back of share price appreciation in DANGCEM (+2.27% w/w) and WAPCO (+0.88% w/w).

Looking forward, the equities market might be mildly positive leading to a slight gain in the ASI. This is hinged on the market benefiting from the spillover effect of excess liquidity in the financial system. Similarly, investors might start positioning for Q2-earning season in June, favoring corporates with FX gains, cost control, clear growth trajectory, and those with potentials for quality interim dividend payment. On the flip side, a potential OMO auction might reduce the inflow of funds into the equities market as elevated OMO yields keep investors anchored to the fixed income market instruments. Similarly, positive sentiments will be moderated by elevated inflation, heightened interest rate, weak Naira and general uncertainty in the global and domestic macroeconomic space. We expect retail investors to continue to take profit from previous week’s gains, tactically slowing the upward movement of the equities market. Additionally, Thursday might be declared as public holiday to mark democracy day. This will reduce the total trading days for the week to three, impacting investors participation level in the market. We advise investors to cherry pick fundamentally sound stocks with potential for interim dividend payment.

Money Market: Stop Rates Declined at the NT-bills PMA

Last week, the financial system opened with a surplus balance of N331.05bn. At the start of the week, the Apex Bank conducted an OMO auction, selling a total of N1.51tn to mop up the excess liquidity in the financial system. Nevertheless, sustained activities at the CBN’s Standing Deposit Facility (SDF) kept the financial system mostly liquid. Additionally, there was an inflow of N239.15bn from OMO maturities that bolstered system liquidity. That said, the financial system closed the week with a surplus balance of N577.79tn. Consequently, the average Open Repo Rate (OPR) fell by 2bps w/w from 26.50% to settle at 26.48%, while the Overnight Rate (OVN) climbed by 3bps w/w from 26.89% to 26.93%.

The Central Bank of Nigeria (CBN) conducted an NT-bills auction with an offer size of N450.00bn across the 91-day, 182-day, and 365-day bills. At the auction, investors’ demand was strong, as total subscriptions printed just at N1.31tn, indicating an oversubscription rate of 2.91x. The bids were majorly skewed towards the longer-tenured instrument, “365-day bill”, which received total bids of N1.2tn. Notably, the Apex Bank sold the exact amount on offer. That said, the stop rate on the 91-day and 365-day bills declined by 2bps and 21bps from 18.00% and 19.56% to settle at 17.98% and 19.35%, respectively. Meanwhile, the stop rate on the 182-day bill remained unchanged at 18.50%.

In the secondary NT-bills market, we observed bullish sentiments supported by the dovish outlook for the yield environment. As a result, the average yield on NT bills declined by 5bps w/w to close at 20.69% (previously, 20.74%). Meanwhile, the average yield on OMO bills rose up by 10bps w/w to settle at 25.80% (previously, 25.70%).

This week, we do not expect any inflow into the financial system. Thus, we expect the funding and money markets to remain at current levels. In the secondary market, we expect bullish sentiments to be sustained, supported by the downward pressure on rates in the fixed-income market. Lastly, we expect the Central Bank to conduct an NT-bill auction across the 91-day, 182-day, and 364-day bills. At the auction, we expect strong investor demand and a decline in stop rates.

Bond Market: Muted Activities in the Secondary Market

The secondary bond market was relatively quiet, as investors shifted their focus to the activities in the Primary Market Auction (PMA). Thus, the average bond yield climbed marginally by 1bp to settle at 18.85% (previously, 18.84%). Similarly, activities were bearish in the corporate bonds market, as the average yield on corporate bonds increased by 13bps to settle at 21.93% (previously, 21.80%).

In the Nigerian secondary Eurobonds, bullish sentiments continued. Investors’ demand remained steady as global market conditions showed signs of stabilisation and Fitch upgraded the country’s credit rating. Consequently, the average yields in the market declined by 31bps w/w to settle at 9.25% (previously 9.56%).

Looking ahead, we anticipate cautious trading activities to persist in the secondary bond market, as investors seek to capitalise on current yields amid a relatively stable monetary policy environment. Meanwhile, we expect the recent positive improvements in the global market to continue driving bullish sentiments among investors in the Nigerian Eurobonds market. While the overall outlook remains cautiously positive, global oil prices, the monetary policies of major economies, and domestic economic data will be key drivers of market sentiment in the week ahead.

Currency Market: Naira appreciated at the Official Market

Last week, the Naira appreciated by 208bps w/w at the official market to close at N1,553.12/$, from its previous close of N1,586.15$. Similarly, the Naira appreciated by 216bps at the parallel market to settle at N1,585.00/$ from its previous close of N1,620.00/$. Lastly, Nigeria’s external reserves fell by 36bps to settle at $38.327bn (previously, $38.467bn).

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. Similarly, inflows from remittances and other FX earnings might support the Naira in the new week. However, legacy issues, debt service pressure, speculations, hoarding, insufficient supply of FX etc. would continue to weaken the Naira in the FX market.