Tuesday, 7 May 2019

NIGERIA WEEK AHEAD: TRUMP DISRUPTS MARKET CALM, UNEMPLOYMENT DATA IN FOCUS

By
Lukman Otunuga,
FXTM Research Analyst

The economic calendar for Nigeria is relatively light this week with PMI figures and unemployment data under the radar. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html

Sentiment towards the nation has already received a boost today after the Stanbic IBTC Bank Nigeria PMI expanded to 55.5 in April 2019 from 53.6 in the previous month. With the reading suggesting signs of improving health and stability in Nigeria’s private sector, this positive sentiment has the potential to support local equities in the near term. However, external forces in the form of renewed trade tensions and geopolitical risks may fuel risk aversion consequently limiting upside gains. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The next major event risk for the Nigerian economy will be on Friday when the unemployment rate for Q4 is scheduled for release. Market players will be looking to see whether the improving domestic conditions have translated to a drop in the unemployment rate.

Speaking of risk-off, financial markets started the week on an extremely cautious note after US President Donald Trump unexpectedly raised the stakes in trade talks with China. Risk aversion swept across Asian and emerging markets in early Monday trading, following the US President’s tweets about raising existing US tariffs on $200 billion worth of Chinese imports this Friday, while hinting at new tariffs “shortly” on a separate $325 billion worth of Chinese goods.

While it remains to be seen whether the Trump administration will press ahead with the added tariffs, it’s already evident that markets are taking some risk off the table, undermining the base case that investors had been pricing in: a formalized US-China trade deal in the near future. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html

With Chinese Vice Premier, Liu He, scheduled to lead a delegation to Washington this week, the timing of the tweets also suggests that President Trump is attempting to push through an immediate resolution to the drawn-out talks. This latest development once again demonstrates how Trump’s tweets can be a wild card for any attempt to formulate a lasting outlook on global growth, as trade tensions remain a key overhang for markets.

Dollar creeps higher post US jobs report
King Dollar struggled for direction on Monday despite Trump’s tariff threats fueling risk aversion. The lack of action seen in the Greenback could be based on investors digesting last week’s mixed US jobs report. Although the US labor force continues to display resilience, wage growth remains a sore spot for the Federal Reserve. Investors will most likely direct their attention towards Jerome Powell’s speech later in the week for more insight into interest rate timings. Should the central bank head sound remotely dovish or fail to bring anything new to the table, the Dollar could end up weakening.

Commodity spotlight – Gold
Gold is positioned to be heavily influenced by US-China trade developments and the Dollar’s valuation this week. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The metal could push back above $1300 if risk aversion accelerates the flight to safety. However, a move back below $1280 signals further downside towards $1265.

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