US bonds rise, equities decline on economic recession worries
U.S. stocks traded lower on Thursday in response to yet another bunch of data suggesting that consumer spending is weakening in the face of a slowing economy and the most aggressive of inflation in 40 years. Subsequently Dow Jones declined 0.8% to 30,775.43, S&P 500 declined 0.9% to 3,785.38 while Nasdaq 100 declined 1.3% to 11,028.74. The 10-year yield Treasury was down by 5 basis points to 2.96%. Gold also declined 0.5% to $1,797.81 per ounce while WTI crude fell 0.5% to $105.22 per barrel.
Russia has confirmed the withdrawal of its troops from Ukraine’s Snake Island in the Black Sea calling the decision a gesture aimed at easing grain shipments in Ukraine. However, there was no sign of a deal on deliveries aimed at easing a global food crisis. At the same time, Russian missile attacks near Ukrainian port city of Odesa early this Friday killed at least 18 people including civilians. Russian stock market fell for a fourth consecutive day this morning heading for its worst week since the start of invasion to Ukraine. Gazprom’s decision to scrap a record dividend kept weighting the sentiment down. IMOEX fell 0.8% to 2250 this morning with Gazprom leading the losses. Gazprom fell as much as 5% adding to a 30% slump from the day before. By contrast, Sberbank, Rosneft rose with gas company Novatek heading for its third week of gains. Russian ruble continued depreciating against the US Dollar after the biggest loss in a month on Wednesday when Finance Minister Anton Siluanov said the government is considering investing in currencies of “friendly countries”. USDRUB was up almost 2% this morning at 53.32 and EURRUB up 2.25% at around 56. Despite the White House announcement of Russia’s default this Monday, Russian Sovereign bonds continued trading mostly unchanged with Russia 28 offed in mid to high 30s and Russia 47 offered in high 20s.
Bunds open slightly weaker retracing trend from yesterday. The 10Y touched a high of 1.369% before dropping to 1.366%, less than 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.26% before retreating to 3.25%, 1 basis point firmer intraday. Stocks open lower as investors continue to grapple with a looming economic recession coupled with doggedly elevated inflation. Consequently, the Stoxx 600, opened lower at 405.91 compared to previous session’s closing of 407.20.
A tilt towards firmness to start the new quarter for SSA as core yields rally with 10Y UST trading sub 3%. ZAMBIN (+0.25pts) leading at the open after a run of selling that saw it underperform so far this week. The country’s inflation continues to slow with June prices rising 9.7% YoY – a 3-year low. The slowing has also been helped by an extension of fuel subsidies to September.
Activity in the Nigerian local Secondary Market for Bonds was mostly calm amid a worsening system liquidity. We witnessed mixed sentiments across the curve with some demand trickling in for the FGN 32s and 42s. Intraday, average yields were marginally down by 1bp across board. Consequently, FGN 42s closed at an offer rate of 13.01%, 4 basis point down from previous level of 13.05% while 50s closed flat. Activity in the Secondary Market for Treasury bills was bearish as weakness persisted in the Money Market. We saw improved offers as Banks endeavoured to create liquidity to fund their commitments. Day-on-day, average discount rates were mostly higher across the curve. Consequently, discount rates on 25th of August 2022 NTB & 24th of November 2022 NTB were at 6.00% (previous: 5.95%) and 6.00%(previous:5.87%) respectively. The exchange rate between the naira and the US dollar closed at N421.29/$1 at NAFEX compared to previous session’s level of N418.50/$1, a depreciation of circa 0.67%.