Equities listed on the Nigerian Stock Exchange (NSE) were not left out of the bearish performance that characterised global stock markets on Monday as the local bourse dipped 0.31 percent.
The NSE key performance index, the All Share Index (ASI), which opened at 31,139.35 points closed at 31,042.33, worsening the market’s return since the start of the year to 1.2 percent.
Sentiment for global equities turned sour over wavering concerns on global economic growth and after the yield on United States’ 3-month Treasury bills rose above that of 10-year Treasuries for the first time since 2007.
This spurred concern about a U.S. recession and triggered sell-offs on equities across the globe.
‘’History has it that the inversion of the U.S. yield curve always leads to an economic recession in the country,’’ said Gbolahan Ologunro, an equity analyst at CSL Stockbrokers.
Equities were sold off across the Asia Pacific as Japan’s Nikkei shed 3.01 percent, Shanghai Stock Exchange (SSE) fell 1.97 percent, Mumbai’s Sensex dropped 0.93 percent, while Hong Kong’s Hang Seng lost 2.03 percent.
In the U.S, the Nasdaq Composite Index was down by 0.59 percent, S&P 500 Index dipped 0.39 percent, while Dow Jones Industrial Average closed 0.34 lower as Wall Street jittered.
Major indices of the NSE closed in red after the close of trading with NSE industrial goods index getting the worst hit of 1.64 percent loss.
At the sound of the closing gong at the Lagos bourse, the NSE Banking Index fell 0.78 percent; Insurance, 0.97 percent; Oil & Gas, 0.74 percent; while NSE Consumer Goods slumped 0.20 percent.
Similarly, the broad index tracking the 30 most-capitalized and liquid stocks on the NSE also lost 0.19 percent in value.
The Ghana Stock Exchange shrugged off the negative performance after gaining marginally by 0.30 percent, even as South African, Egyptian and Kenyan stocks plunged 1.95 percent, 1.15 percent and 0.58 percent, respectively.
Earlier in the month, the Organisation for Economic Cooperation and Development (OECD) revised downwards its global growth forecast as it warned that major economies in the Eurozone, Asia and United States would see economic activities slow down.
The OECD also warned that the global financial market might be weighed down as signs of weakness in the economy would affect investors’ confidence, especially in the equities market.
“Recession in the U.S would definitely affect the global economy and financial markets as investors might want to be careful in terms of their exposure to financial markets across the globe,’’ Ologunro said, explaining that some of the investors might want to rebalance their portfolios into fixed income assets.
The risks of waning economic growth in the bond market would likely see yields on sovereigns soar which might clog the credit pipeline, heightening costs of capital and discouraging investment activities of firms, a development that could result to lower output and worsened unemployment rate.
Although gloom and doom permeate the media, major central bankers have adopted a dovish stance to drive the economy and Wall Street is said to believe that the Federal Reserve which is currently holding off rate hikes might be inclined to cut rate at year-end.
Meanwhile, bullish sentiment remains strong in the Nigerian bonds market as average T-Bills yield rose to 13.02 percent, according to a report by Meristem Securities to clients on Monday.
OLUWASEGUN OLAKOYENIKAN & SEGUN ADAMS
