Finance
U.S. Stocks Advance While Treasuries, Dollar Fall on Fed
LAGOS-U.S. stocks advanced while Treasuries and the dollar reversed gains as a Federal Reserve official said the central bank should consider delaying the end of its bond buying program. Oil climbed from the lowest in almost four years.
The Standard & Poor’s 500 Index (SPX) gained 0.6 percent at 1:27 p.m. in New York, after dropping as much as 1.5 percent earlier. The Russell 2000 Index rallied 1.6 percent. The 10-year Treasury yield added 4 basis points to 2.17 percent, reversing an earlier decline. Stoxx Europe 600 Index lost 0.4 percent, after tumbling as much as 2.9 percent. West Texas Intermediate oil jumped 1.9 percent after retreating below $80 for the first time since June 2012. The Bloomberg Dollar Spot Index weakened 0.1 percent after jumping 0.4 percent earlier.
St. Louis Fed Bank President James Bullard said the central bank should consider delaying the end of its bond buying to halt the decline in inflation expectations. Data today showed jobless claims unexpectedly dropped last week to their lowest level in 14 years, while industrial production rose in September by the most in almost two years.
“The Bullard comments were a short-term shot of adrenaline,” Chad Morganlander, a money manager at St. Louis-based Stifel Nicolaus & Co., which oversees about $160 billion, said in a telephone interview. “The U.S. economy is doing quite well, yet there’s overall concern that the euro zone is falling into the abyss.”
Speaking in an interview today with Bloomberg News, Bullard said U.S. economic fundamentals remain strong and he blamed the market turmoil on downgrades in the outlook for Europe.
Important Consideration
“Inflation expectations are declining in the U.S.,” he said. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”
About $672 billion was wiped from global shares yesterday and average bond yields around the world fell to records after reports showed a bigger-than-projected drop in U.S. retail sales. The S&P 500 plunged more than 3 percent, the biggest intraday drop in three years, before losses were pared in the final two hours.
Fed Chair Janet Yellen helped ease the selloff after voicing confidence in the durability of the U.S. economic expansion. She spoke at a closed-door meeting last weekend, people familiar with her comments told Bloomberg News yesterday.
The benchmark gauge has fallen 7 percent from its Sept. 18 record amid concern a global slowdown will hurt the American economy just as the Fed weighs when to raise interest rates. The central bank has been gradually winding down its $85 billion plan of monthly bond purchases since January and is poised to stop the final $15 billion at the end of the month.
Ebola, Earnings
Concern about the spread of Ebola has also started to affect investor psychology, and investors are watching corporate earnings for clues to the economy’s strength. Profit for S&P 500 members probably rose 4.8 percent in the third quarter and sales increased 4.2 percent, analysts projected.
Netflix Inc. slumped 20 percent after reporting third-quarter subscriber growth that missed the company’s forecast. EBay, which will spin off the PayPal payments business, fell 5 percent after giving a sales projection for the fourth quarter that missed estimates.
Europe Shares
The Stoxx 600 has slumped 7.7 percent in eight days. The index yesterday entered a correction, falling more than 10 percent from a high in June. Trading volume was 121 percent above the 30-day average today, according to data compiled by Bloomberg.
Nestle SA lost 3 percent after the world’s biggest food company reported nine-month sales that missed analysts’ estimates. Shire Plc, which plunged the most in 12 years yesterday, tumbled 7.3 percent today, after AbbVie Inc.’s board formally asked shareholders to vote against a takeover of the U.K. drugmaker.
WTI rallied 1.9 percent to $83.31 after declining as much as 2.5 percent. Brent added 0.6 percent to $84.25 a barrel.
U.S. 10-year Treasuries rose 3 basis points after yields slid to 1.86 percent yesterday, the lowest since May 2013. The rush for the safest fixed-income assets sent average bond yields around the world to a record low yesterday, according to the Bank of America Merrill Lynch Global Broad Market Index.
Japan’s 10-year yield dropped as low as 0.47 percent today, the least since April 2013.
In Europe, higher-yielding government bonds came under renewed pressure amid a selloff in Greek assets. Greece’s 10-year yield jumped to 8.79 percent. Italy’s 10-year yield climbed 15 basis points to 2.57 percent and Ireland’s increased 13 basis points to 1.82 percent.
Spanish bonds extended declines after the government sold less debt than its maximum target at auction.
BLOOMBERG-
Business
Nigeria pays US$4.9 billion on petrol subsidy in 2024- NNPCL
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Yemie ADEOYE
INSPITE of the official position of the Nigerian government that the controversial petrol subsidy is gone for good as announced by the President on assumption of office, the state owned Nigerian National Petroleum Corporation Limited, NNPCL has disclosed that petrol subsidy is still fully operational in Nigeria, although, under a different identity.
Umar Ajiya, Chief Financial Officer at the NNPCL, disclosed that it cost the company a staggering N7.8 trillion (US$4.9) to cover this price gap in the first seven months of 2024.
Rather than simply referring to these claims as subsidies, he stated that the company is merely managing the price difference in petrol imports on behalf of the federation, stressing that this should not be misconstrued as a return to subsidy payments.
This revelation has reignited discussions on whether the NNPC is indirectly offering subsidies, a concept typically defined as selling a product below its cost price.
Documents reviewed by Biztellers.com.ng showed that the term “subsidy” was used extensively in official correspondence between the NNPCL and the presidency, particularly in reference to the “shortfall.”
Recall that President Bola Tinubu reportedly approved NNPC’s request to utilize the 2023 final dividends due to the federation to offset these costs.
However, during a media briefing on Monday about the company’s 2023 audited financial statements, Ajiya refuted claims that the NNPC is involved in any subsidy scheme.
Ajiya further disclosed that the Nigerian government owes the NNPC N7.8 trillion ($4.9 billion) in subsidy-related debts for the period from January to July 2024.
In furtherance of his clarification to the News Agency of Nigeria (NAN), Ajiya insisted that no subsidy payments have been made to any marketer in the last nine years, citing the NNPC’s role as the sole importer of petrol under supply contracts.
He said, “In the last eight to nine years, NNPC Ltd. has not paid anyone a dime as a subsidy; no kobo has been disbursed by NNPC Ltd. in the name of subsidy. No marketer has received any payment from us for subsidy.”
“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So the difference between the landing price and that half price is a shortfall.
“And the deal is between the Federation and NNPC Ltd., to reconcile, sometimes they give us money, so there is no money exchanging hands with any marketer in the name of subsidy.”
Ajiya remained silent on how much of the $4.9 billion could have been remitted to the federation account if the NNPC had not been covering the “shortfall.”
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Banking
CBN Denies Currency Devaluation
The Central Bank of Nigeria (CBN) has refuted claims of devaluing the.
Earlier reports suggested that the CBN had devalued the Naira, lowering its exchange rate from N631 to the dollar, compared to the previous day’s rate of N461.60 at the Importers and Exporters (I&E) window.
However, the Central Bank of Nigeria (CBN) released a statement on Thursday through its Acting Head of Corporate Communications, Dr. Isa Abdulmumin, categorizing the report as false information.
In the statement titled ‘CBN Has Not Devalued The Naira’, he said the attention of the apex bank was drawn to the news report by an Abuja based newspaper edition of June 1, 2023, titled “CB Devalues Naira To 630/51”.
However, the CBN stated categorically that the news report was replete with outright FALSEHOODS and destabilizing innuendos, ‘reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.’
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters (I&E) window traded this morning (June 1, 2023) at N465/USS1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market,” the CBN spokesman added.
He, therefore, advised media practitioners to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public.
Banking
BREAKING: CBN Increases Interest Rate By 0.5%
The interest rate in Nigeria has been raised to 18.5 percent, up by 0.5 percent, from 18 percent where it was pegged in March 2023.
The Central Banks of Nigeria’s (CBN) Monetary Policy Committee (MPC) resolved to this effect at its third meeting of 2023 in Abuja, on Wednesday.
Governor, CBN, Godwin Emefiele, made the disclosure in the communiqué of the MPC’s meeting, thereafter.
While engaging the media at the end of the two-day meeting, Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
In the view of the MPC, rising inflation rate is traceable to the high energy cost and challenges around the supply chain, among others, which lie outside the corridors of the CBN.
Emefiele said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Biztellers reports that the CBN had effected six consecutive interest rate increases, which has seen the rate move from 11.5 percent in March 2022 to 18.5 percent in May 2023.