The mood across equity markets in Nigeria has improved this week with the All-Share Index rising by roughly 0.14% yesterday. With the presidential elections over, investors are now redirecting their attention back towards Nigeria’s economy and what can be done to promote economic growth this year. Sentiment towards the Nigerian Naira also showed some improvement as the local currencies slightly gained against the Dollar on the parallel markets. This show of stability and recovery across Nigerian stock markets is likely to continue ahead of the parliamentary elections this weekend.
Markets on standby in absence of fresh
catalyst
Asian stocks
traded mixed this morning as investors adopted a ‘wait and see’ approach due to
a lack of fresh catalysts.
With much of the
hope of a US-China trade deal priced in and the risks of a no-deal Brexit by
March 29 heavily priced out, a new theme needs to be brought to the table.
Although geopolitical risks continue to linger in the background, they appear
contained for now while ongoing concerns over global growth are slowly becoming
old news.
The movements
across global equity markets are likely to be limited until investors are
offered some real clarity on the progress of US-China trade talks. With a high
degree of optimism over trade talks already baked into the markets, many will
be left empty-handed if the final deal fails to mirror the heightened
expectations. Such a development would impact appetite for riskier assets,
consequently punishing equities across the globe.
While US
equities have erased the losses seen since December, this year-to-date rally
appears to be running on fumes. Are equity bulls running out of steam? Time
will tell.
Currency spotlight – GBPUSD
It is shaping up
to be another rough trading week for the British Pound thanks to growing
concerns over Prime Minister Theresa May’s ability to pass her Brexit deal
through Parliament by March 12.
Reports of the
talks between European Union and British negotiators ending in an impasse
worsened matters for the British Pound, with the GBPUSD trading around 1.3134
as of writing. While a lack of progress or clarity on Brexit talks will most
likely punish the Pound this week, the downside will be limited by speculation
over the government extending Article 50 to prevent a no-deal outcome. With
uncertainty still a major theme when dealing with Brexit, the Pound’s medium to
longer term outlook remains open to question.
In regards to
the technical picture, the GBPUSD is under pressure on the daily charts. The
breakdown below 1.3200 at the start of the week has provided bears with enough
ammunition to attack 1.3080. A breach below 1.3080 will open a path back
towards the psychological 1.3000 level.
Commodity spotlight – Gold
Gold prices
edged higher this morning after rebounding from a more than five-week low
yesterday thanks to a pause in the stock market rally.
The absence of a
fresh market catalyst has the potential to send investors back towards Gold
which tends to perform well in times of uncertainty. While the near-term
outlook for the precious metal points to further downside amid Dollar strength
and US-China trade optimism, the medium to longer term outlook remains in
favour of bulls. With geopolitical risks, concerns over global growth, and
expectations over the Fed taking a break on monetary tightening this year being
dominant market themes, Gold still has upside potential. Focusing on the
technical perspective, the yellow metal is seen depreciating towards $1278 as
long as the psychological $1300 level proves to be a reliable resistance. A
breakout back above this psychological level will bring bulls back into the
game.
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