US stock futures fall on lower-than-anticipated China economic data

US equities finished higher while futures declined amid frail economic data from China fuelling worries about global outlook and wiping out the hopes of a rebound in risk assets. Although US stock prices closed positive on Friday, with S & P 500 up 2.39% to 4,023.89, DOW at 32,196.66, up 1.47% and NASDAQ 100 up by 3.82% to 11,805.00, futures which show likely opening levels for equities are currently negative with the S&P Futures down 0.81% to 3,987.25, DOW Futures down 0.54% to 31,946.00 while NASDAQ Futures at 12,252.50, down 1.06%. The yield on 10-year USTs declined by 3bps to 2.89%, at the same time Gold fell by 0.1% to $1,809.20 an ounce. Meanwhile, Brent crude fell 1.4% to $110.02 per barrel on investor concerns about Chinese data showing dismal industrial output and consumer spending due to covid lockdowns. Markets are still worried about the risk of a recession and rising cost of borrowing coupled with the efforts by Finland and Sweden to join NATO which could worsen tensions in eastern Europe. Later, this week, Fed Chair Jerome Powell will be speaking on Tuesday.

European commission is preparing to set out guidance on how EU companies can pay for Russian gas without breaching sanctions. The companies can open accounts at Gaprombank as required by Russia, but whether they can pay in rubles or not is not yet clear. Gas futures in the Netherlands have fallen as much as 3% on the news extending Friday’s 9.2% decline. At the same time, German Chancellor Olaf Sholz said that Germany is determined to stop importing Russian oil by the end of this year even if EU fails to agree on a joint ban in its next sanctions. Meanwhile, Joe Biden told the leaders Sweden and Finland that he supports their initiative to join NATO. Two Nordic countries should deliver their formal applications at NATO’s headquarters in Brussels this week. After a successful counterattack of Ukrainian troops in Kharkiv, NATO chief Stoltenberg commented that Russian invasion to Ukraine is “not going as Moscow had planned” and that “Ukraine can win the war”. Russia’s stock market rose this Monday led by energy companies and was up 1.6% at around 2343. Lukoil and Gazprom were the best performers. USDRUB struggled to keep Friday’s rebound from the lowest levels since 2020 and dopped back to $/63.25. So far Russian currency has gained 13.69% from the beginning of the year. Сurrency controls and high energy prices have been turning ruble into the strongest currency in the EM space. Meanwhile, Gazprom Neft PJSC is planning to repay $3 billion worth of its bonds early after EU has imposed sanctions on its debt. Gazprom could be the first Russian company to do this after the West has started sanctioning Russia for the invasion to Ukraine. Russian sovereign bonds were slightly up with Russia 28 trading in low 20s and Russia 47 in mid 20s.

European commission is preparing to set out guidance on how EU companies can pay for Russian gas without breaching sanctions. The companies can open accounts at Gaprombank as required by Russia, but whether they can pay in rubles or not is not yet clear. Gas futures in the Netherlands have fallen as much as 3% on the news extending Friday’s 9.2% decline. At the same time, German Chancellor Olaf Sholz said that Germany is determined to stop importing Russian oil by the end of this year even if EU fails to agree on a joint ban in its next sanctions. Meanwhile, Joe Biden told the leaders Sweden and Finland that he supports their initiative to join NATO. Two Nordic countries should deliver their formal applications at NATO’s headquarters in Brussels this week. After a successful counterattack of Ukrainian troops in Kharkiv, NATO chief Stoltenberg commented that Russian invasion to Ukraine is “not going as Moscow had planned” and that “Ukraine can win the war”. Russia’s stock market rose this Monday led by energy companies and was up 1.6% at around 2343. Lukoil and Gazprom were the best performers. USDRUB struggled to keep Friday’s rebound from the lowest levels since 2020 and dopped back to $/63.25. So far Russian currency has gained 13.69% from the beginning of the year. Сurrency controls and high energy prices have been turning ruble into the strongest currency in the EM space. Meanwhile, Gazprom Neft PJSC is planning to repay $3 billion worth of its bonds early after EU has imposed sanctions on its debt. Gazprom could be the first Russian company to do this after the West has started sanctioning Russia for the invasion to Ukraine. Russian sovereign bonds were slightly up with Russia 28 trading in low 20s and Russia 47 in mid 20s.

A sluggish open to kick off the week for SSA as risk sentiment remains negative following disappointing retail sales and industrial production data for China in April. GABON continues its recent bout of selling, down 0.25pts, while KENINT opens slightly firmer with some demand on belly to long tenors.

Activity in the Nigerian local Secondary Market for Bonds was quiet ahead of the upcoming auction on Monday. The DMO will be offering a total of N225bn across 3 tenors-25s, 32s and 42s, all re-openings. We saw bullish sentiments across board with low trade volumes. Intraday, average yields were down by 2bps across the curve. Consequently, FGN 26s closed at an offer rate of 10.25%, down 5pbs from previous session’s level of 10.30% while 50s closed at an offer rate 12.80% down 3pbs from previous session’s level of 12.83%. Secondary Market for Treasury bills was muted although Money Market liquidity remained relatively stable. Demand eased across the short to long tenured maturities. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rate on 30th May 2022 SPEB and the new 1-year NTB were stable at 2.95% and 4.51% respectively. The exchange rate between the naira and the US dollar closed at N416.25/$1 at NAFEX compared to previous session’s level of N417.14/$1, an appreciation of circa 0.21%.