US equities plunge, bonds yield climb on looming rise in inflation figure
US Stocks declined, and 10-year Bonds yield rose to the highest in the last 4 years ahead of an inflation figure that is set to support the case for aggressive Fed policy tightening. Later today, the U.S. is expected to release an inflation figure for March exceeding 8%. Accordingly, the S & P 500 lost 1.96% to 4,412.53, Nasdaq decreased by 2.18% to 13,411.96 while Dow declined 1.19% to 34,308.08. U.S. Treasuries dropped, taking the 10-year yield above 2.80% to close at 2.82% while haven assets like gold rose 0.2% to $1,957.19 an ounce. Oil price rebounded partially amid uncertainties in supply due to the war in Ukraine and demand from China owing to covid resurgence. Consequently, Brent crude rose by 2.8% to $101.25 per barrel. Investors are worried that if interest rates must be raised at a fast speed, it will have a negative effect on economic growth.
A few Russian regions, including Belgorod and Kursk, have announced an increased level of a terrorist threat. Earlier, US officials said that Russia started reinforcing and resupplying its troops in eastern Ukraine. After meeting Putin in Moscow, Austrian Chancellor, Karl Nehammer, made it clear, that sanctions against Russia will be increased if Russia does not end the hostilities. The fifth package of EU sanctions will contain restrictions on the supply of the equipment to produce liquified gas, where Gazprom and Novatek run a few projects. GAZPRU 22 was down to 60 on the news, while NVTKRM 22 was flat at 49. Lukoil 30 has dropped from 45.5 to 44. Russian government bonds were mostly flat yesterday with Russia 28 at around 24 and Russia 47 at 18. Rouble was lower with USDRUB up from 76 to 79. A few Russian companies have announced that they will not pay dividends for 2021. NLMK, X5 and Severstal do not plan to pay dividends for the first quarter of 2022 and the fourth quarter of 2021. IMOEX lost 1.4% to close at 2557.16.
Bunds open weaker following the trend from yesterday. The 10Y touched a high of 0.872% before dropping to 0.856%, down 2bps. Yields continued the upward trend over concerns related to expected US CPI figure of over 8%, hawkish central Banks and commodity supply disruptions that could be triggered by covid resurgence in China. Peripherals mirrored the move on bunds with a relatively weak open; 10Y BTPs yields went as high as 2.44% before retreating to 2.41%, 3 basis points firmer. Stocks opened lower; the Stoxx 600, opened lower at 454.08 compared to previous sessions closing of 458.26.
SSA yet weaker at the open as selling in rates continues to weigh on risk assets. The space opened the week with heavy losses in GHANA (-1.00) and NGERIA (-1.00) while recent outperformer – ZAMBIN – only managed to close flat. SOAF’s latest $3 billion offering dominated headlines yesterday with books about $8 billion for the first issuance since 2019. The issuance – just about equally split in 10-year and 30-year tranches – is trading lower with bids some 25c below re-offer (100). ANGOL 32, another recent issue, finally succumbing to the overall negative risk sentiment with offers seen in the low 99 handle at the open.