US equities show signs of recovery, bonds yield drop as FED lays out plan to reduce balance sheet
US stocks appear to be picking up after a sell off caused by Fed’s hawkish minutes. Although US stock prices closed negative yesterday with S & P 500 down 0.97% to 4,481.86, DOW at 34,496.27, down 0.42% and NASDAQ 100 down by 2.20% to 13,888.82.00, futures which show likely opening levels for equities are currently positive with the S&P Futures up at 0.17% (4,484.50), DOW Futures 0.07% (34,420.00) while NASDAQ Futures at 14,561.75, up 0.39%. The yield on 10-year USTs declined 2bps to 2.57% amid Feds plan to reduce its balance sheet by over $1 trillion every year while raising rates. Brent crude rose 0.7% to $102.33 per barrel as Commodity markets continue to be affected by disruptions caused by Russia’s war in Ukraine while Gold was little unchanged at $1,930 an ounce.
Russian sovereign bonds remained under pressure with Russia 28 down from 32 to 25 and Russia 47 down from 21 to 18. First time in history Russia paid its external debt in roubles. An equivalent of $649.2 was paid for Russia 22 and Russia 42 to investors from “unfriendly” countries. New US and UK sanctions were announced yesterday and have affected the largest Russian banks. In a move, coordinated with US counterparts, the UK has banned all new outward investment in Russia and froze assets of Sberbank and Credit Bank of Moscow. UK will also end all imports of Russian coal and oil by the end of 2022. US will impose full blocking sanctions on Sberbank and Alfa Bank, Russia’s largest private bank. Sberbank shares have fallen 8% on the news. Putin’s daughters along with a wife and a daughter of Russian Foreign Minister, Sergey Lavrov, will also be sanctioned. Despite of the new sanctions’ announcement, while IMOEX closed 2% lower on the day yesterday, Russian rouble has strengthened with USDRUB moving down from 83.31 to 75.20.
Bunds opened stronger retracing the trend from yesterday. The 10Y touched a high of 0.644% before closing at 0.647%,1bps up day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.22% before retreating to close at 2.21%, 1 basis points firmer. Stocks opened higher; the Stoxx 600, opened higher at 457.57 compared to previous sessions closing of 455.97. Focus remains on ECB Minutes.
The space looks to be shaking off yesterday’s weakness at the open with GHANA (+0.375) leading. Performance on Tuesday was rattled by amped hawkish rhetoric from the Fed with recent outperformers GHANA (-1.50), KENINT (-1.25) and SENEGL (-1.50) particularly weighed down. Elsewhere, ANGOL opening muted ahead of expected issuance following expiration of the tender offers in 2025 and 2028 notes yesterday.