Inflation jumped to 9.4 percent in July

Consumer price inflation for the month of July 2019, upped by 30 basis points to 9.40 percent, from a previous rate of 9.10 percent. The uptick followed inflationary pressures across all segments of the economy particularly the non-food sector primarily on the back of the recent hike in tariff within the utilities sub-sector (housing, water, electricity and gas). Inflation at the non-food sector ended the month of July at 10.7 percent, representing 4 percentage point increment with the inflation for the utilities sub-sector moving up by 300 basis points from 6.8 percent in June 2019 to 9.8 percent in July. The inflation at the food and beverages sector also rose marginally by a basis point to settle at 6.6 percent in July with inflation at the (coffee, tea and cocoa) recording the highest rate of 17.5 percent. Inflation for August is projected to tick upward mainly on the back of expenditures on educational materials in the run-up to the commencement of a new academic year for schools. Presented below is the trend analysis of the CPI between July 2018 and July 2019:

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.

The yield on the 91-Day dropped marginally by a basis point to settle at 14.72 percent, that on the 182-Day T-Bill was quoted at 15.14 percent, representing 3 basis points decline. Interest rate on the 364-Day T-Bill however, upped by a basis point to settle at 17.92 percent. The yield on the other treasury securities however, remained unchanged at their previous week’s values.

An amount of GHS823.49 million was raised by the Government at the primary market, out of the GHS827.49 million tendered. This fell below the previous week’s value of GHS1,034.53 million but outpaced the GHS540.00 million scheduled to be raised in the week under review. An amount of GHS638.00 million is expected to be raised by the Government in the upcoming auction. The 91-Day T-Bill dominated Government purchase, constituting 44.25 percent share of the overall bids tendered.

Despite the inflationary uptick recorded in the month of July, general economic sentiment appears to be favourable as indicated by the recently released Composite Index of Economy Activity (CIEA) by the Bank of Ghana. It is therefore expected that yield curve will sustain its normality and the inflation uptick may not necessarily stimulate significant rise in yields on Government treasury securities.

Ghana Stock Exchange

The Ghana Stock Exchange closed in the red despite the continued trickling in of positive half year financial reports by some listed firms. Ghana oil company Ltd saw 22.52 percent appreciation of its net profit-after-tax with earnings per share growing from 13.4 pesewas to 16.5 pesewas. Similar positive outturn was posted by MTN Ghana Ltd which ended with a net profit-after-tax of GHS536.37 million, representing 30.50 percent rise from the 2018 half-year performance. These upbeat, however, failed to revived investors sentiment leading to bearish closure of the market. The GSE Composite Index recorded 0.21 percent decline to settle at 2,311.48 points, representing a year-to-date loss of 10.14 percent. The GSE Financial Stocks Index also nosedived by 1.37 percent to settle at 2,029.07 points, reflecting a year-to-date loss of 5.79 percent.

Market outturns improved significantly over the previous week’s trading activities. This was on the back of block-trading activities within MTN Ghana Ltd. At the closing bell, 8.73 million shares exchanged hands in eighteen equities at a value of GHS25.95 million. MTN recorded the lion share of 97.97 percent of the overall traded volume. Market capitalization however, declined by marginally by 0.09 percent to settle at GHS57,480.05 million.

Stock Price Movements

A total of eleven equities changed prices with 3 advancers and 8 laggards recorded. Fan Milk Ltd topped the gainers, rising by 70 pesewas to trade at GHS5.55 per share. CAL Bank Ltd and MTN Ghana Ltd also upped their share prices by a pesewa each to trade at GHS1.00 and 71 pesewas per share respectively.

On the flip side, Unilever Ghana Ltd ended the week’s trade as the worst performing stock, losing 59 pesewas to close at GHS17.00 per share. Total Petroleum Ltd and Enterprise Group Ltd dropped b 40 pesewas and 20 pesewas to trade at GHS3.00 and GHS1.80 per share respectively. SAMBA and Republic Bank (Ghana) Ltd ended with same closing price of 55 pesewas after each dropping 10 pesewas. GCB Bank Ltd, Guinness Ghana Breweries Ltd and Ecobank Ghana Ltd also shared prices in the week’s trade.

Currency Market

Source: Bank of Ghana 16.08.19

The Ghana cedi ended with a week-on-week appreciation against the Euro but tumbled versus the US dollar and the British pound. The US dollar spurred by a rise in consumer retail data for the month of July and easing tension surrounding the trade tariff war between the US and China posted a weekly gain. The 0.7 percent rise in retail sales data for the month of July in the US helped subdue market uncertainties associated with the recent inversion of the US yield curve which signalled an imminent economic recession. Trump’s decision to delay the enforcement of the 10 percent extra tariff on $300.00 billion worth of imported Chinese goods helped ease market uncertainties and subsequently contributed to the positive closure of the market. The dollar thus posted 0.16 week-on-week appreciation against the cedi as it traded at GHS5.27 on the interbank currency market. The year-to-date depreciation of the cedi thus increased to 8.54 percent last Friday.

The British pound closed the trading week on a positive note, lifted by expectation beating economic data and decision by UK’s opposition leader to mount pressure on Johnson’s government until it obtains a trade deal before exiting the bloc. In the week under review, Britain’s retail sales data saw a 0.2 percent monthly rise, fist uptick since the beginning of the year, exceeding the 0.2 percent forecasted fall. Consumer inflation came in much stronger than expected in July as it settled at 2.1 percent from a previous rate of 2.0 percent whereas wage data upped to its highest in 11 years to 3.7 percent in the second quarter of 2019. The British pound thus saw 0.21 percent appreciation as it traded at GHS6.40 on the local currency market. The year-to-date depreciation of the cedi this stood at 3.57 percent.

The Euro was on the backfoot against major peers on the international currency market as downbeat data from the bloc amidst political uncertainties in some member countries affected demand for the single currency. The threat by Italian deputy prime minister – Matteo Salvini to bring down the coalition government and weakening GDP data in Germany by 0.1 percent in the 2^nd quarter daunted market sentiment in the week under review. The stanch decision by the European Central Bank to implement the asset buying programme despite displeasure by some market players also contributed to the weakness of the euro in the trading week. The euro thus recorded a week-on-week depreciation of 0.77 percent to trade at GHS5.86. The year-to-date depreciation of the cedi thus stood at 5.82 percent.

International Markets

Trading on the Wallstreet ended bearish weighed by rising uncertainties associated with the US-China tariff war, weakening global economic growth and falling bonds yields in the US economy. In the weak under review, yields on the 2-year and 10-year treasury bonds went into the negative raising concerns of economic recession to affect demand for stocks. The S&P 500 went down by 1.03 percent to settle at 2,888.68 points. The Dow Jones Industrial Average, similarly, declined by 1.53 percent to settle at an index level of 25,886.01 points.

The London Stock Exchange closed in the red spurred by a recovery of the British pound which slowed down market activities by multinationals as the strong pound affected their purchasing power. Last Friday’s worst outage due to technical failure on the London Stock Exchange significantly affected the bourse as investors were unable to either buy or sell shares for close to 2 hours. The FTSE 100 thus went down by 1.88 percent to settle at 7,117.15 points.

The Japanese Stock Exchange tumbled as the rekindled trade tariff war continued to take a toll on market activities. The Nikkei 225 thus recorded a week-on-week decline by 1.29 percent to settle at 20,418.81 points.

On the African equity market, the Nairobi All Share Index rebounded by 2.26 percent to settle at 151.40 points. The Johannesburg All Share Index however, dropped by 2.99 percent to settle at 53,874.52 points. The Nigerian All Share Index thus posted a weekly decline of 1.40 percent to settle at 26,925.29 points.

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

Brent crude oil posted a marginal gain despite OPEC’s dovish outlook of the oil market. Concerns of imminent economic recessions in some advanced economies, trade war tariff between the US & China with its possible spill over effects on other economies and production threat by some top oil producing countries trimmed global oil demand for the rest of 2019 between 40,000 barrels per day to 1.10 million but failed to fully erased previous days gain. Brent crude oil thus upped by 11 cents to trade at $58.64 per barrel.

Gold upped its unit price on the international commodities market spurred by intensifying US-China trade war and growing worries over global economies. The sharp decline in government bonds in the advanced economies especially the US buoyed demand for the safe-haven asset. Gold thus added $15.10 to trade at $1,523.60 per ounce.

Cocoa tumbled on the international commodities market following a spree of bumper harvest in top producers in Africa. Cameroon – Africa’s 3^rd largest producer of the soft crop is expecting its production for the upcoming season to double to 120,000 tonnes from 58,000 tonnes recorded in the last season. Cocoa thus lost $84.00 to close at $2,111.00 per metric tonne.

Coffee lost value following the continued weakening of the Brazilian real against major trading currencies such as the US dollar. The Brazilian real which depreciated beyond the BRL4 per dollar threshold amidst over supply concerns closed the soft crop in the red. Coffee thus shed 4 cents to trade at 93 cents per pound.