Market News

*Global stocks drop as Trump reignites trade war risk with threat of 50% tax on EU goods 

*Nigerian stock market drops by N201bn

Kayode Tokede with agency report Barclays is recommending investors shift away from Nigeria’s longer-dated dollar bonds, noting that yields in the mid-section of the curve now look more attractive.

Analysts led by Andreas Kolbe remain overweight Nigerian hard-currency bonds, but noted the yield curve has lagged the steepening momentum seen in other emerging markets, where short-dated bonds have rallied more than longer maturities. That leaves room for Nigerian shorter-dated securities to play catch-up, Bloomberg quoted Kolbe to have said, suggesting clients switch out of the bonds maturing 2049 into 2033 paper.

The Z-spread between the 2033 and 2049 issues — the volatility-adjusted yield premium above Treasuries over the life of the bond — has actually flattened by about 25 basis points year-to-date, Kolbe said. That means it “screens as too flat relative to the front-end,” compared with high-yield emerging-market debt curves.

“We hence think value has shifted away from the long end and into the 8- to 10-year belly of the curve,” Kolbe added.

Given the steepness of Nigeria’s curve, the trade should also benefit from attractive rolldown, he said, referring to the strategy that profits from a rise in bond prices as they approach maturity.

The bond due Jan. 2049 is trading with a yield of about 10.8 percent, while the Sept. 2033 issue offers 10.4 percent. Yields on both bonds have slid more than 100 basis points since early-April as easing trade war tensions lifted emerging-market assets.

Nigeria’s average yield premium over Treasuries stands currently at 571 basis points, down about 350 basis points since May 2023, when President Bola Tinubu took office and embarked on a series of reforms. Tinubu was endorsed this week as the ruling party’s candidate for the 2027 presidential election. Meanwhile, Stock markets have dropped sharply after US President, Donald Trump reignited fears of a trade war by threatening to impose high tariffs on the EU and smartphone giant Apple.

European shares fell 1.7 per cent, the US S&P 500 fell 1.1 per cent in early trading and the tech-heavy Nasdaq fell 1.6 per cent. The Dow Jones Industrial Average fell 408 points, or one per cent.

Equally, the Nigerian Exchange Limited (NGX) this week dropped by N201 billion by market capitalisation ( week-on-week) amid the massive volatility in the global stock market.

Trump threatened to impose a 50 per cent tax from next month on all imports to the US from the EU, including on pharmaceuticals and luxury items. He also warned Apple and Samsung of a 25 per cent tariff on any iPhones manufactured outside the United States but sold there.

“This latest threat is worse than the worst-case scenario,” said Fiona Cincotta, senior market analyst at City Index.

US Treasury secretary Scott Bessent said Trump did not believe EU trade offers to the US were good enough and that he hoped the new tariff threat would “light a fire” under officials in talks with Washington.

In early April, Mr Trump unveiled high tariffs on nearly every country, with a minimum of 10 per cent, bringing the world to the brink of a trade war, although he later announced a 90-day suspension.

In response to the tariffs on China, Apple has been looking to move iPhone manufacturing to India.

The pan-European STOXX 600 index fell 1.9 per cent by early afternoon on Friday, and closed down 0.93 per cent to record a weekly fall for the first time in five weeks.

The Euro STOXX Volatility index spiked to its highest in more than four weeks. Stock indexes in France, Spain and Italy were down between 2.3 per cent and 2.8 per cent, UK-based Independent Newspaper reported. Also, UK’s blue-chip FTSE-100 was down by 0.6 per cent after recovering slightly from a steeper drop. Similarly, the German DAX fell 2.1 per cent, after rising close to an all-time high earlier in the day, on economic news.

Shares in German carmakers and luxury companies, some of the most exposed to tariffs, fell. Porsche (3.93 per cent), Mercedes (3.99 per cent) and BMW (3.71 per cent) all finished down on the news.

The US president claimed on his Truth Social network: “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with.”

He announced that Apple would be hit with 25 per cent tariffs if phones sold in the US were not made there, sending the iPhone maker’s shares down almost 4 per cent in pre-market trading, later adding that it would also apply to other foreign phone companies.

In the meantime, the NGX this week dropped by N201 billion by market capitalisation. The market capitalisation dropped to N68.752 trillion yesterday, which was about N201 billion decline when compared with the N68.952 trillion the stock market opened for trading, while the NGX All-Share Index dipped by 0.62per cent WoW to close at 109,028.62 basis points from 109,710.37 basis points the market opened for trading.

The NGX ASI also dropped by 0.14 per cent to close at 109,028.62 basis points yesterday, from 109,183.02 basis points it opened for trading the previous day.   However, analysts at Cordros Research stated that investor sentiment in the Nigerian stock market turned negative this week, buoyed by reactions to the Central Bank of Nigeria’s decision to maintain the Monetary Policy Rate at 27.5 per cent, alongside profit-taking in recent outperformers and a shift in capital flows toward the fixed income market.