• April’s Inflation upped by 0.2 percentage point
• Yield on the 182-Day T-Bill upped by 12 basis points.
• GSE recorded another round of weekly gain.
• Cedi staged a strong recovery against the British pound, as the later bleeds on Brexit woes.
• Brent crude oil resumes gains as the Persian Gulf tension trims supply.

Macroeconomic Update

April’s Inflation upped by 0.2 percentage point

Inflation for April rose by 0.2 percentage point to settle at 9.5 percent from a previous rate of 9.3 percent. The rise stemmed from inflationary pressures at the non-food sub-sector which came strongly from the recreation and culture, transport, clothing and footwear, furnishing, and household sub sectors of the economy. On the back of this, non-food inflation climbed up by 0.7 percentage points to settle at 10.4 percent in April.  Inflation at the food and beverages sub-sector however, dropped by 1.1 percentage point to settle at 7.3 percent in April.

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

Last Friday’s auction saw the yields on the treasury instrument recording another round of upward adjustment. The yield on the 91-Day T-Bill edged up by 5 basis points to settle at 14.92 percent. Interest rates on the 182-Day T-Bill also upturned by 12 basis points to settle at 15.47 percent but that on the 364-Day T-Bill narrowly dropped by 2 basis points to settle at 18.01 percent. Yields on treasury notes and bonds were, however, unchanged at the auction.

At the auction, a total of GHS660.81 million were tendered by investors out of which the Government accepted GHS607.97 million. The accepted amount however, missed the week’s target of GHS889.00 million also below the previous week’s value of GHS715.23 million. The 91-Day T-Bill continued to dominate Government’s purchase as it constituted 57.50 percent of the total bids raised by the Government. A total of GHS708.00 million bids are expected to be raised in the upcoming auction through the sales of the short-term treasury instruments.

Ahead of the implementation of the much-anticipated mop up exercise of the financial sector, market uncertainties continue to weigh on investor activities in the economy. This coupled with elements of inflationary risk and concerns of forex volatility are likely to impede Government’s plans of bringing interest rates down especially those on the short-dated ones. To sustain the current normality while achieving policy rate cuts effective for private sector growth, the rollout of the mop up exercise should be carried with well thought plan to avert possible market uncertainties.

Ghana Stock Exchange

The equity market continues to recover some of its recent losses spurred by improved demand for some financial and telecom-sector stocks. The GSE Composite Index thus rose by 3.18 percent to settle at an index level of 2,415.22 points, representing a year-to-date loss of 6.10 percent. The GSE Financial Stocks Index also advanced by 4.87 percent to end the trading week at an index level of 2,048.72 points, corresponding to a year-to-date loss of 4.88 percent.

Trades were significantly below last week’s outturn. A turnover of 2.75 million valued at GHS2.81 million were recorded this week against the 31.34 million worth GHS4.45 witnessed in the previous week’s trade. MTN Ghana Ltd led the activity chart with 57.60 percent of the overall traded volume. Market capitalization however, upturned by 1.29 percent to settle at GHS58,938.58 million on the account of the positive closure of the market.

Stock Price Movements

A total of six equities change price at the end of the week’s trading. Standard Chartered Bank Ltd emerged as the best performing stock rising by GHS2.80 to trade at GHS21.80 per share. GCB Bank Ltd followed with a price uptick of 51 pesewas to sell at GHS5.01 per share. Ecobank Ghana Ltd and MTN Ghana Ltd also posted 8 pesewas and 2 pesewas gains to trade at GHS6.80 and 72 pesewas per share respectively.

CAL Bank Ltd suffered a loss of 4 pesewas to trade at 82 pesewas per share. The Trust Bank (Gambia) also trimmed its share price by 3 pesewas to end the week’s trade at 20 pesewas per share.

Currency Market

Source: Bank of Ghana 17.05.19

The interbank currency market ended with the Ghana cedi recovering grounds versus the British pound and the Euro but lost to the US dollar. The US dollar rebounded to close the trading week in the gains after dropping the previous week on account of Trump’s tariff war against the US dollar. The resurgence of the greenback was driven by the release of upbeat data from the US economy which pointed to a sustained labour market and positive sentiment build ups in the world’s largest economy. On the labour market, weekly jobless claim fell sharply by 16,000 to 212,000 claims against the targeted 220,000. On the housing front, homebuilding increased more than expected in April as it rose by 5.7 percent to a seasonally adjusted annual rate of 1.24 million. Also, yields on treasury securities showed signs of recovery with the yield on the 10-year treasury note rising from a two-month low of 2.354 percent to 2.387 percent. On the back of this, the Ghana cedi posted a week-on-week depreciation of 0.12 percent with the dollar selling at GHS5.10. The year-to-date depreciation of the cedi thus increased to 5.46 percent.

The British pound posted one of its weakest performance against major rivalling currencies as the six-weeks of talks between UK’ Prime Minister – Theresa May and her opposition leader – Jeremy Corbyn failed to produce the expected results. The rising possibility of Theresa May not winning a vote of no confidence as she faces UK’s lawmakers later this month has compelled her to public announce her exit plans; negatively affecting the value of the pound sterling. The pound recorded its longest run of unbroken loss in a century versus the euro and also dropped to its lowest in four months against the dollar. Against the cedi, the pound ended with a weekly depreciation of 2.19 percent after trimming 14 pesewas to sell at GHS6.50. The year-to-date depreciation of the cedi thus narrowed to 4.94 percent.    

The Euro came under pressure during the week’s trade ahead of an upcoming general election in Italy where a win for Italy’s right-wing League party could impede policy adoptions and implementation within the entire bloc. Matteo Salvini who is widely seen as an antagonist to various policies of the bloc is however, tipped to secure a win in the upcoming election hence subduing a potential rise in the euro as eurozone’s inflation came in stronger in April at 1.7 percent. The Ghana cedi thus ended with a weekly gain of 0.59 percent as the selling price of the euro dropped to GHS5.69. The year-to-date depreciation of the cedi reduced to 3.15 percent. 

International Markets

US equity market posted another round of weekly decline as heightened trade war uncertainty following Trump's decision to ban U.S. companies from using Huawei telecommunications technology negatively affected trading on the market. The ban which was retaliated by the Chinese Government as it threatened to walk away from any negotiation with the US sparked uncertainties with the market weighing on trade-sensitive stocks. Caterpillar and 3M stock had their share prices stripped off by 3.04 percent and 1.58 percent respectively on account of the trade tension. The S&P 500 thus ended with a weekly decline of 0.76 percent to settle at 2,859.53 points. The Dow Jones Industrial Average also dropped by 0.69 percent to close at 25,764.00 points.

On the London Stock Exchange, the FTSE 100 posted a positive week-on-week gain despite the Brexit and global trade uncertainties. The failure of the UK Government and the opposition leader to agree to a withdrawal deal shifted investor’s focus on stocks by way of reducing their losses associated with the pound sterling. The FTSE 100 thus rose by 2.02 percent to settle at 7,348.62 points.

Stocks on the Asian market came under pressure as Trump banned usage of Chinese technology in the US economy. Stocks from the Shipbuilding, Communication and Real Estate sectors were the most hit by the ban to affect the market index. Nikkei 225 dropped by 0.44 percent to settle at 21,250.09 points.

On the African equity market, the Nigerian All Share Index closed with a weekly gain of 0.08 percent to settle at 28,871.93 points. The Johannesburg All Share Index however, dipped by 1.05 percent to settle at 56,183.21 points. The Nairobi All Share Index, similarly, went down by 5.19 percent to settle at 145.33 points.

Source:www.bloomberg.com, & www.investing.com

Brent crude oil recorded its biggest weekly gain in three weeks as tensions in the middle east and the lack of interest by the Chinese Government to engage in another trade talk affected supply of the energy commodity. The swirl of tensions at the Persian Gulf this week following Saudi Araba’s accusation that Iran was behind attacks on its pumping stations was followed by episodes of attacks on Iran’s oil tankers, which overall affected global supply. Brent crude oil thus advanced by $1.59 to trade at $72.21 per barrel.

Gold closed trading on a much softer note as risk aversion by some investors drove the value of the yellow metal southwards. Threat of the rekindled trade tariff war between the US and China saw investors ignoring bullish data which suggested a recovery in business activities in the global space. Gold dropped by $9.35 to close the week at $1,277.35 per ounce.

Cocoa recovered some grounds on the international commodities market as farmers in top grower – Ivory Coast were pessimistic about production outlook in the April-September harvesting season. This was sparked by the lower-than-expected amount of rainfall needed for a good yield. Cocoa thus upticked by $23.00 to trade at $2,353.00 per metric tonne. 

Coffee dropped to 13-year low in the week under review primarily accounted by the general weakness in the Brazilian real and the controlled supply onto the international commodities market. The high vulnerability of the Brazilian real to the strength of the US dollar and supply threat by unfavourable climatic conditions in Venezuela and Brazil weighed on the soft crop. Coffee closed trading at 89 cents after losing 2 cents from the week’s opening value.

Note: The data in this publication is Friday on Friday (w/w)