Five things to know to start your Thursday

Stock market moves further south

Nigeria’s equities market closed further in the red zone on Wednesday as sentiment continues to worsen on the Bourse despite little instances of bargain-hunting.

At the close of trading session Wednesday, the Nigerian Exchange Limited All-Share Index (ASI) and Market Capitalisation decreased further by 0.07percent or N19billion, from preceding day high of 52,756.62 points and N28.441trillion respectively to 52,721.34 points and N28.422trillion.

Academy Press lead the laggards league after its share price decreased from preceding day high of N1.51 to N1.36, losing 15kobo or 9.93percent.

Other top laggards are Berger Paints which dropped from N7.90 to N7.20, after losing 70kobo or N8.86 and Neimeth which decreased from N1.75 to N1.60, losing 15kobo or 8.57percent.

May & Baker also dropped from a high of N4.70 to N4.30, losing 40kobo or 8.51percent, followed by Wema Bank which decreased from day open high of N3.55 to N3.28, losing 27kobo or 7.61percent.

FBN Holdings, Jaiz Bank, GTCO, FCMB Group and Transcorp were most traded stocks on the Nigerian Exchange Limited (NGX) on Wednesday. In 5,948 deals, investors exchanged 611,973,850 shares valued at N7.426trillion.

Also, the market’s positive return year-to-date (YtD) by decreased further to 23.42 percent.

Aramco flaunts trading ambitions with first West Africa crude sale

The trading unit of Saudi Arabia’s most valuable company, Aramco, sold its first batch of West African crude oil. This move emphasises the company’s ambitious goal of expanding its commercial operations beyond the borders of the Middle East.

The company has processed a million-barrel cargo shipment of Equatorial Guinea Zafiro crude oil to Exxon Mobil Corp, which will be processed by Exxon’s refining system in Europe. A shipment which is believed, according to information made available to Bloomberg, to arrive in early June,

Spurned by its recent successes in profit and media attention, Aramco, which stands for Arabian American Co., has taken as one of its short-term objectives to enter into new markets with considerable downside risk. The company is aiming at buying crude oil facilities that will enable it to replace Russia as a major supplier of oil and gas to Europe.

The West African crude oil market has always caught the attention of Aramco, especially following most international oil companies’ (IOCs’) exit from this region. The company saw this as an opportunity to invest in mostly the upstream side of the business in order to expand its profit frontiers.

Crude oil from West Africa is known to contain less sulphur and be denser than that from the Middle East, making it a better alternative to replace Russian supplies to Europe.

Since the war in Ukraine, Aramco has made important moves to supply Danish and Polish refiners with oil, helping them stop their reliance on Russian oil.

It was learnt that the trading unit of Aramco, which has a production target of 6 million barrels a day, depends to an extent on crude from third-party sources to meet this target. What it does is that it processes those barrels of oil in non-Saudi refineries, most of them stationed in Europe, and buys back the refined crude products to sell elsewhere.

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Dow Jones average, S&P record biggest loss in 2 years

The Dow Jones average lost 1165 basis points to close at 31490 basis points on Wednesday, which represented the biggest fall in its all-share index (ASI) since June 2020, tradingeconomics noted.

Apparently, this loss was caused by a drop in the consumer food index after another major retailer, Walmart, warned that profit expectations for the second quarter could be badly affected owing to rising cost pressure.

Further examination revealed that the target shares fell by 25%, the most since 1987, due to rising costs and supply disruptions that forced the company to reduce its profit forecast.

“Walmart stocks fell 6.8 percent after issuing a similar statement on Tuesday.” Tradingeconomics report stated

Like a co-joined twin, the S&P 500 lost 4.04 percent of its market value to close trading at 3924 basis points, its’ biggest drop since June 2020 while the Nasdaq lost 4.7 percent to 11418 basis points, the worst performance since May 5th.

Investors are worried and not sure of the direction of the market following high inflation seen in rising food and energy prices, which has impacted negatively on borrowing costs.

On Wednesday, May 18, 2022, Federal Reserve Chairman Jerome Powell promised that the bank would continue to raise interest rates until its target inflation rate of 2% was met. According to the US Labor Department, inflation in the US currently stands at 8.3 percent, which is the highest in nearly 40 years.

Brent Crude falls below $110

The London Brent crude futures contract traded below $110 per barrel, losing nearly 2% of its exchange value after reaching an all-time high of $115.3, the highest since March 11, 2022. A situation caused by the general cautious mood of the market as investors and traders assess current developments in the oil market.

With rising inflation fears driving stock prices down, crude oil prices responded negatively not only to this fear but generally to the rising COVID-19 cases in China, which has driven demand from the Asian tiger downwards.

“At the same time, worries over slowing demand due to new lockdowns and more coronavirus cases in China also pushed prices down,” Tradingeconomics stated.

On the supply side, the US Energy Information Agency (EIA) reported a decline in US crude inventories to 3.4 million barrels and fuel stocks to 4.7 million barrels last week. A situation that helped crude oil prices maintain their push for higher prices due to a significant fall in global crude oil supply.

With total oil supply still trying to catch a breath following Russia’s infamous invasion of the sovereign state of Ukraine, the European Union and its Western allies’ continued shifting of attention away from Russian crude oil has made Russia lose nearly 9 percent of its crude oil OPEC+ production, bringing the target down to 1.28 million bpd.

“The oil market remains tight and volatility is set to continue in the next few weeks.” Tradingeconomics added.

EU to exit Russian fuels with €300bn plan

In a strategic move that started with Russia’s invasion of Ukraine, the European Union has kicked off its plan to mobilise up to 300 billion euros to exit its dependence on Russian oil and gas.

The European Commission President, Ursula von der Leyen, while speaking at the #REPowerEU summit, said that the investment will include about €10 billion to fund missing links for gas and LNG and oil infrastructure to stop shipments from Russia.

She also added that the EU was proposing higher legally-binding EU targets for renewable energy and energy savings by 2030.

“RePowerEU will help us to save more energy, to accelerate the phasing out of fossil fuels and, most importantly, to kickstart investments on a new scale,” she said. “So I would say this will be the speed-charging of our European Green Deal.”

“We propose a joint procurement mechanism and joint outreach to supplying countries,” she concluded.

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