US equities rise, oil drops as OPEC+ agrees to increase supply
US Stocks finished higher as markets seemed to have shrugged off concerns about the momentum at which the Federal reserve would hike rates and the risk of an economic recession. Consequently, the S & P 500 gained 1.84%% to close at 4,176.82, NASDAQ 100 rose 2.69% to close at 12,316.90 while DOW increased by 1.33% to close at 33,248.28. The yield on 10-year USTs was steady at 2.91% while Gold fell 0.1% to $1,866.11 an ounce. Meanwhile, Brent crude fell 0.4% to $117.11 per barrel as OPEC+ consented to increase the volume of its oil supply for July and August following pressure by major consumers to fill the void caused by sanctions on Russian supplies.
The EU finally approved the sixth package of sanctions against Russia. The fresh sanctions pertain to crude oil and petroleum products imported from Russia to the EU. However, a temporary exception is made for pipeline oil. The Russian market opened lower in reaction to the new sanctions. IMOEX index declined 2% to 2300 points with oil & gas sector stocks including LUKOIL, ROSNEFT and GAZPROM following suit. USDRUB is currently at 62.10 level. Russian sovereigns continue to trade in a narrow corridor with lack of liquidity. Russia 28 is above 30 while Russia 47 is at 20 level. Meanwhile OFAC has added Russian entrepreneur Alexei Mordashov and members of his family, as well as companies under their control, to the specially designated nationals and blocked persons (SDN) list. The SDN sanctions list also includes companies associated with the Mordashov family, including Severstal, Severgroup, Nordgold, and Algorithm.The license to curtail operations with Severstal and Nordgold is valid till August 31 & July 1 respectively.
Bunds open slightly stronger retracing the trend from yesterday. The 10Y touched a high of 1.26% before dropping to 1.23%, 3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 3.25% before retreating to 3.21%, 4 basis points firmer intraday. Stocks open higher prior to release of US jobs report that may give investors a signal on the speed at which central banks will hike interest rates. Consequently, the Stoxx 600, opened higher at 442.20 compared to previous session’s closing of 441.23.
Kenya’s lawmakers passed the 2022-23 budget on Thursday and also created a select committee to monitor public debt that will be constituted after the August elections. The committee will be primarily made up of opposition members – a move that will supposedly rein in new debt uptake – as the Treasury seeks to up the debt ceiling to KES10 trillion, 77% of the projected size of the economy end 2022.
Activity in the Nigerian local Secondary Market for Bonds was calm amid a relatively buoyant Money Market liquidity. We saw a slight improvement on offers across the mid end of the curve while the short and long end were steady. Intraday, average yields were mostly flat across the curve. Consequently, FGN 36s closed at an offer rate of 12.65%, up 5pbs from previous session’s level of 12.60% while 50s closed flat at an offer rate of 13.05%. Activity in the Secondary Market for Treasury bills was quiet although system liquidity stood at over N500bn. We saw mixed sentiments across most of the curve. Day-on-day, average discount rates were mostly unchanged. Consequently, discount rate on 5th of July 2022 OMO and 3rd of October 2022 SPEB were at 3.00% and 3.50% respectively. The exchange rate between the naira and the US dollar closed at N418.45/$1 at NAFEX compared to previous session’s level of N419.14/$1, an appreciation of circa 0.16%.