Lukman Otunuga, Senior Research Analyst at FXTM,
The mood across financial markets continues to brighten on Tuesday amid signs of goodwill between the United States and China ahead of the “phase one” trade deal.
Reports of the U.S Treasury Department dropping the designation of China as a currency manipulator is a move seen easing tensions as both sides move one step closer to finding a middle ground on trade. This encouraging news has certainly injected global equity bulls with confidence as shares in Asia rallied on Tuesday morning. The positive sentiment was also reflected on Wall Street which logged record highs overnight, driven by sharp rises in tech stocks. While hopes of a “phase one” trade deal should continue supporting risk sentiment, investors could still be left empty handed if the finer details of the deal disappoint expectations.
In other news, corporate earning season kicks off with some of the biggest U.S banks. J.P. Morgan, Wells Fargo and Citigroup will be under the spotlight as they report quarterly earnings before the bell. US stocks could extend gains if earnings from these major banks meet or exceed market expectations.
Dollar on standby ahead of US inflation
It could be an eventful trading week for the Dollar with the latest inflation figures on Tuesday and retail sales report on Thursday offering insight into the health of the US economy. The annual Inflation rate during the last month of 2019 is expected to remain broadly in line with the Fed’s golden 2% target, reinforcing speculation around the Federal Reserve taking a pause on rates.
The Dollar’s valuation is likely to remain influenced by trade developments and global sentiment this week. Should risk-on remain the name of the game this week, appetite towards the Dollar is set to fade as investors turn to riskier assets. Focusing on the technical picture, the Dollar Index may slip towards 97.00 should 97.50 prove to be a stubborn resistance level.
Oil shaky as supply disruption fears recede
Oil prices weakened towards $58 on Tuesday morning, extending four straight days of decline as geopolitical tensions eased and concerns over possible supply disruptions faded.
However, the commodity could rebound this week if the “phase one” US-China trade deal boosts market sentiment and revives optimism over the global economy. This outcome will be good news for emerging market crude producers like Nigeria, especially when considering how oil still accounts for roughly 90% of export earnings and over 70% of government revenues.
All eyes will be on Nigeria’s latest inflation figures scheduled for release on Wednesday, Jan 15. If inflation jumps to the forecasted 12.10% in December 2019, the Central Bank of Nigeria will be one step further to cutting interest rates during the first half of 2020. With a rate cut out of the picture in the meantime, much focus will remain on the loan to deposit ratio which is currently at 65%.
Gold hammered by risk-on sentiment
Gold prices stumbled to their lowest level in nearly two weeks on Tuesday as trade hopes boosted risk sentiment and blunted appetite for safe-haven assets. The precious metal is trading around $1539 as of writing and could extend losses when the United States and China formally sign the “phase one” trade deal. However, the precious metal may rebound if the finer details of the deal underwhelm markets.
Technical traders will continue to closely observe how price behave around the $1555 level. A daily close below this point should signal a decline towards $1535. However, a move above $1555 may open the doors towards $1570.
NCC Threatens Illegal Users of GSM Boosters with Arrest, Prosecution
Nigerian Communication Commission (NCC) has warned telecom consumers to desist from using illegal GSM boosters.
The commission also said that anyone caught using a GSM booster without obtaining approval of a duly licensed network operator will face arrest and prosecution.
GSM boosters are devices that transmit and receive telecommunications signals and can therefore interfere with other radio frequency equipment.
Ikechukwu Adinde, director, public affairs, NCC, said in a notice published on NCC website, that only licensed network operators are allowed to use GSM boosters.
The booster, also known as amplifier or repeater is made up of three main elements – exterior antenna, amplifier, and interior antenna.
They form a wireless system to boost cellular reception
“Members of the public should note that, willful interference with any wireless telegraphy is an offence under Section 16 of the Telegraphy Act, 2004,”it said
The agency said it will not condone any flagrant breach of this law.
It has also enforced measures to prosecute offenders.
Accordingly, monitoring mechanisms have been put in place and anyone caught using a GSM booster without obtaining approval of a duly licensed network operator will face arrest and prosecution.
“Any member of the public with useful information regarding the illegal use of GSM Boosters should contact the Commission on 09-4617000/7351 or send an email to [email protected],” the notice said.
“Individuals desirous of using GSM Boosters should note that they can only do so in conjunction with licensed network operators,” it added.
Tizeti announced that it selected Nokia’s Fastmile Long Term Evolution (LTE) technology to enable usprovide superior internet services to over 1 Million subscribers in Port Harcourt, Edo and Ogun in Nigeria.
Tizeti will deploy Nokia’s AirScale Base Station TDD-LTE and FastmileFixed Wireless Access (FWA) gatewaysto deliver premium internet and Virtual Private Network (VPN) services to Residential, Small and Medium Enterprises (SMEs).
The solution will also enable Tizeti’sto deliver a more robust, high-speedinternet service to subscribers and the flexibility to seamlessly evolve to 5G Fixed Wireless Access when needed.
Nokia’s FWA solution enables Tizeti to fast-track broadband access and provide a best-in-class broadband experience to its subscribers.
Nokia’sAirScale Base Stations ensure high-quality connectivity and coverage and enablesTizeti to evolve the network in line with customer demand.
Nokia’sFastmilegateways connect wirelessly to the existing network to createa fastbroadband connection and enhanced Wi-Fi experience in the home.
The Nokia Network Services Platform will help Tizeti to simplify operations and quickly respond to changing market demands.
Kendall Ananyi, Tizeti, said:“We are committed to providing the best-in-class network experience to our subscribers. We are confident that Nokia’s proven technology and expertise will help us differentiate our services based on quality. This a crucial project for us as it introduces LTE in our networks and allows us to bring new and innovative services to our subscribers.”
Eniola Balogun, Nokia, said:“We are thrilled to work with Tizeti on the initiative to upgrade their network to bring the latest products and services to its subscribers. Nokia Fastmile will help Tizeti to cost-effectively enhance the customer experience.
The project will also enable them to delight their subscribers by providing more reliable data services.
On the other hand, Tizeti will benefit by adding new revenue streams.”
Risk Assets Push Higher on Vaccine Hopes; Eyes on the Fed
By Hussein Sayed, Chief Market Strategist at FXTM,
After two consecutive weeks of back-to-back declines, global stocks kicked off Monday with solid gains amid a surge in M&A activity and positive signs towards vaccine developments. Currency markets were little changed ahead of a busy week of monetary policy announcements, while Oil and Gold ticked slightly higher.
The two big deals announced over the weekend were Softbank’s plan to sell chipmaker ARM to Nvidia for more than $40 billion and Gilead Sciences to acquire Immunomedics for a price tag of $21 billion. Meanwhile, on the vaccine front, AstraZeneca resumed its phase-3 trial on Covid-19 after being suspended last week following a neurological illness developed in one participant, and Pfizer announced that its vaccine could be distributed before year-end if found safe and effective.
Central Banks will take centre stage this week with the Federal Reserve, Bank of England and Bank of Japan all due to announce policy decisions. Out of the three meetings, the Fed is likely to be the most watched following its historic shift towards average inflation targeting. The big question remains how will the FOMC put this policy into action?
From what we know now, the Fed is set up to keep interest rates near zero for a long time, possibly for several years. Given the new framework, any spike in inflation won’t translate into immediate rate hikes as the Fed wants to compensate for the lost years when they have failed to hit the target. The dot plot will be the key guide for investors and traders alike. If inflation projections remain at 2% or below for the foreseeable future, this will solidify market expectations for a low rate environment for many years to come. That said, Jay Powell would still have to explain in more detail how the new framework will be translated into policy action.
In June’s economic projections, the Fed anticipated unemployment would be at 9.3% by year-end, but, in August, unemployment was well below that forecast at 8.4%. Many other economic data surprised to the upside during the June – August period in a clear sign that most economists were overly pessimistic towards the strength of the recovery. However, there is still a considerable amount of uncertainty given the latest surge in Covid-19 cases worldwide and the US, especially as we get closer into the winter season. A second wave will undoubtedly put the recovery at risk in the final quarter of the year and it will be interesting to see the Fed’s view on that issue.
As for the market selloff over the past two weeks, the Fed isn’t likely to show any signs of concern. In fact, policymakers should be satisfied with the pullback as the risk of a bubble in several assets has been growing due to the Fed’s extremely accommodative policies. Unless we see another 10 -15% drop, do not expect the Fed to intervene.
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