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Investors Stampede for Safety as Trump Strikes Again

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By Lukman Otunuga, Senior Research Analyst at FXTM,

A wave of risk aversion is sweeping across financial markets this morning after US President Donald Trump announced a new round of tariff hikes on Chinese imports.

In an unexpected move that dealt a crippling blow to global sentiment, Trump said he would impose a 10% tariff on the remaining $300 billion of Chinese imports from September 1. With China already pledging countermeasures if the US implements the additional tariffs, things could get really messy – something that will ultimately cripple risk sentiment even further.

The negative mood across markets suggests that investors are jittery over sizzling trade tensions between the world’s two largest economies sabotaging the already fragile global growth outlook.

Asian equities were painted red during early trading following Wall Street’s declines overnight. In Europe, shares are positioned to open lower as investors avoid riskier assets. The caution from Asian and European markets could find its way back into Wall Street this afternoon.

King Dollar hit by Trump tariffs, NFP in focus

Investors who were looking for an opportunity to attack the Dollar were given the thumbs up yesterday after Trump said he would impose additional tariffs on China.

Trump’s decision has certainly placed the Federal Reserve in a tricky position and boosted expectations over another US rate cut this year. The Dollar is likely to extend losses against a basket of major currencies ahead of the US jobs report this afternoon. Given how future US rate cuts will be influenced by economic data, there will be a strong focus on this afternoon’s jobs data.

This week has already offered some mixed data surrounding US employment. The July ADP employment data topped expectations by rising 156k while jobless claims rose by 8,000 to 215,000 in the seven days ending July 27.

Should the July NFP meet or exceed market forecasts, investors may re-evaluate whether the Fed will cut interest rates again. However, a disappointing report should strengthen the argument for lower rates in the United States – ultimately weakening the Dollar.

Pound diced and minced by no deal Brexit fears

Sterling has been diced and minced by rising fears over the United Kingdom crashing out of the European Union with no Brexit deal in place.

The thickening fog of uncertainty around Brexit has prevented the Bank of England from joining the global monetary easing train this month. Although the BoE has stated that “interest rates could move in either direction if there’s a no-deal Brexit”, the next move is veering towards an interest rate cut as Brexit fears shroud the UK economy. With domestic economic conditions likely to deteriorate further as uncertainty over Brexit intensifies, it is a question of when rather than if the BoE will cut interest rates in 2019.

The GBPUSD remains bearish on the weekly charts. With bears firmly fastened into the driving seat, the downside momentum has the potential to send prices towards 1.2000 in the short to medium term.


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Commodity spotlight – Gold

Gold glittered with extreme intensity on Thursday, jumping to a fresh two week high above $1445 as Trump’s tariff tweets sent investors stampeding for safety.

The precious metal has scope to push higher this afternoon if the pending US jobs report fails to meet market expectations. With concerns over slowing global growth, renewed US-China trade tensions and Brexit uncertainty accelerating the flight to safety, Gold is fundamentally bullish.

Focusing on the technical picture, an intraday breakout above $1445 could encourage a move higher towards $1450 and $1470, respectively.

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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

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Nigerian Manufacturing Sector Contracts for 5th Consecutive Month – CBN

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The Manufacturing Purchasing Managers’ Index (PMI) in September stood at 46.9 index points, indicating a contraction in the Nigerian manufacturing sector for the fifth month.

This was disclosed by the Central Bank of Nigeria (CBN) in its September PMI report released last week.

According to the report, four out of the 14 sub-sectors surveyed reported expansion (above the 50 per cent threshold) in September.

It listed the expansion order as electrical equipment; transportation equipment; cement and nonmetallic mineral products.

It said the remaining sub-sectors reported contractions in the following order: petroleum & coal products; primary metal; furniture & related products; printing & related support activities; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; fabricated metal products and plastics & rubber products; while the paper product sub-sector was stable.

Production

At 47.3 points, the production level index for the manufacturing sector indicated contraction in September for the fifth consecutive month.

Of the 14 sub-sectors surveyed, five recorded increased production level, one reported same level of production, while eight recorded declines in production.

New Orders

At 46.4 points, the new orders index also contracted in September for the fifth consecutive month. Six sub-sectors reported expansion in new orders, while the remaining eight recorded contraction in the month.

Supplier Delivery Time

The manufacturing supplier delivery time index stood at 53.5 points in the month, indicating a faster supplier delivery time for the fifth time.

Six of the 14 sub-sectors recorded improved suppliers’ delivery time, five reported same level, while three recorded slower delivery time

Employment Level

The employment level index stood at 44.1 points, indicating contraction in employment level for the sixth consecutive month.

Of the 14 sub-sectors, two recorded growth in employment, three recorded same level of employment, while the remaining nine recorded lower employment level in the review month.

Raw material Inventories

The manufacturing sector inventories index also contracted for the sixth consecutive time in September to 43.0 points. Four of the 14 sub-sectors recorded growth in inventories, while the remaining 10 recorded lower raw material inventories.


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FG Sacked IST Members over Fraud- Ahmed

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Mrs Zainab Ahmed, minister of Finance Budget and National Planning, has said the Federal Government sacked some past members of the Investments and Securities Tribunal (IST) as they indulged in corruption.

FG Sacked IST Members over Fraud- Ahmed

Inaugurating the new members, the minister charged the new members to eschew corruption and be forthright.

Bar. Azi Amos Isaac was appointed as Chairman for a five year term and Bar. Nosa Smart Osemwengie, was re-appointed as member for a second term of four years.

“The problem with the tribunal has been infighting amongst members, lack of industrial harmony and series of complaints bordering on maladministration.

“This has been the bane of the tribunal and a source of embarrassment not only for the Ministry of Finance but for the government in general,” Ahmed said.

The new chairman, Azi, assured the finance minister that, “the teething issue of restiveness has been addressed since he assumed duty,” adding that, “The place is calm and the staff have become very supportive.”

Azi said since 2003, the tribunal has “given judgment in the value of assets worth over N844 billion and that from 2017 to date, they have given decisions in monetary value totalling over N28bn.

“It has not failed in its adjudicatory responsibility.

“It has carried out its assignment with candour and integrity and intends to improve on what has been on ground.”

 


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CBN Bans Customer-to-Customer Forex Transfer

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Central Bank of Nigeria (CBN) has banned transfer of foreign exchange (forex) from one customer to another.

CBN Bans Customer-to-Customer Forex Transfer

According to the apex bank, forex cash lodgements into domiciliary accounts can only be done by the account owners henceforth.

An internal memo available in the media space explains that the new guidelines are necessary to review the utilisation of inflows into customers domiciliary accounts.

The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.

“They can have unfettered access by telegraphic transfers up to a limit of $40,000 monthly for payment of medical bills, school fees, subscription to professional bodies subject to existing CBN guidelines.

“Transfers from one customer to another is prohibited. Transfer within related companies is allowed subject to a limit of $50,000 per month.”

It recommended that proceeds from non-oil exports should be sold to banks, used for repayment of dollar term loans, and self-utilisation for trade transactions for LC, bills and Form A.

Also oil export proceeds from E&P companies are to be used to pay contractors and service providers employed by the oil companies in addition to the recommended uses for non-oil FX proceeds.

Offshore forex inflows from other Nigerian banks and internal account to forex transfers sourced from offshore inflows are to be used for trade transactions subject to eligibility for E-Form M.

“Upon confirmation of the legitimacy of the inflows, customers can have unfettered access, subject to a maximum of $50,000,” the document read.

“Utilisation for trade transactions subject to processing of eligible trade transactions using E-Form M. Payment for services must be backed with demand note from offshore beneficiary and other regulatory documents.

“Related party transfers are allowed to the maximum of the inflow received. The transfer request should be backed by a signed instruction from the account holder.” Payment of government fees and levies are also allowed to the maritime, oil and gas, aviation. government parastatals and export processing zones.

 


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