US equities extend gains to snap three weeks of losses; treasuries fall

U.S stocks rallied to put a positive finish to a sharp weekly gain. All three major U.S. stock benchmarks closed sharply higher on Friday with Nasdaq 100 gaining more than 3%, as investors reassessed the expected path of Fed Reserve interest- rate hikes. Subsequently, the S&P 500 increased 3.1% to finish at 3,911.74, its biggest daily percentage gain since May 18, 2020.Nasdaq 100 increased 3.3% to finish at 11,607.62, while Dow Jones increased 2.7% to finish at 31,500.68. The 10-year yield Treasury increased to 3.125%. Gold price reduced $1.90 to $1,827.90 per ounce, while WTI crude oil increased $4.01 to $108.28 per barrel. Meanwhile, St. Louis Fed President James Bullard is expected to speak on Wednesday. Also, we have a flurry of reports coming in this week-US durable goods report is due today, US GDP on Wednesday, US consumer income, PCE deflator, initial jobless claims on Thursday and US construction spending, ISM Manufacturing due Friday.

Russia defaulted on its foreign-currency sovereign debt for the first time since 1918.However, Russian officials pushed back against the default designation, saying it had the funds to cover any bill but had been forced into non-payment.  Finance Minister Anton Siluanov dismissed the situation last week as a “farce”. In response, Vladimir Putin introduced new regulations that indicated Russia’s obligations on foreign-currency bonds were fulfilled once the appropriate amount of rubles had been transferred to the local paying agent. However, none of the underlying bonds have terms that allow for settlement in the local currency.  Russia’s Eurobonds have traded at distressed levels since the start of March and the default is mostly symbolic now. Russia 28 remains offered at mid-30s and Russia 47 in high 20s. Russian stock market swung between slight gains and losses this Monday morning with IMOEX currently up 0.22% at 2,396. Producers of precious metals Polyus and Polymetal were among the worst performers after G7 proposed a ban on new gold imports from Russia. Natural-gas companies Gazprom and Novatek advanced along with Sberbank and Yandex. Russian ruble remained range bound with USDRUB trading around 53 and EURRUB around 56. As Russian exporters prepare for a key tax period at the end of this month, some analysts expect a correction in ruble strength, adding that the Russian Central Bank is expected to cut the interested rates again in July due to deflation.

Bunds open weaker retracing trend from Friday. The 10Y touched a high of 1.50% before dropping to 1.47%, 3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.43% before retreating to 3.39%, 4 basis points firmer intraday. Stocks open higher as attractive valuations over-shadowed the risk of an economic recession. Consequently, the Stoxx 600, opened higher at 417.47 compared to previous session’s closing of 412.93. Meanwhile, ECB President Christine Lagarde, Fed Chair Jerome Powell, BOE Governor Andrew Bailey and Cleveland Fed President Loretta Mester are due to speak at an ECB event on Wednesday. On the data front, Eurozone CPI report is expected on Friday.

A muted open to SSA to kick off the week after Friday’s strong open faded into the close. KENINT (+0.125pts) firmer however even as an expected $238 million IMF disbursement is yet get board approval. Elsewhere, FIDBAN was upgraded to B from B- by Fitch.

Activity in the Nigerian local Secondary Market for Bonds was tepid as system liquidity weakened further. There was mixed sentiment across board. However, demand for long tenured maturities diminished. Intraday, average yields were down by 1 basis point across the curve. Consequently, FGN 28s closed at an offer rate of 10.74%, 1 basis point down from previous level of 10.75% while 50s closed flat. Activity in the Secondary Market for Treasury bills was relatively calm amid a frail Money Market liquidity. We saw a mixed performance with a bearish bias. Day-on-day, average discount rates were mostly unchanged across board. Consequently, discount rates on 24th of November 2022 NTB and 8th of June 2023 were at 5.55% and 6.20% respectively. We expect some relief next week as inflows hit the system. The exchange rate between the naira and the US dollar closed at N418.74/$1 at NAFEX compared to previous session’s level of N419.17/$1, an appreciation of circa 0.10%.