US equities waver as chances of FED hike increases on high inflation print

US stocks finished lower on Wednesday, extending their streak to four days on the heels of the highly anticipated June consumer price inflation report that came in hotter than expected at 9.1% which notched a fresh 41-year high. The CPI jumped 1.3% last month to mark the third time in the last four months its topped 1%. Subsequently, Dow Jones declined 0.7% to finish at 30,772.79, S&P 500 declined 0.4% to finish at 3,801.78 while Nasdaq 100 declined 0.2% to finish at 11,247.58. The 10-year yield Treasury declined 6 basis points to 2.904%. Gold price was up $10.70 to $1,735.50 per ounce while WTI crude oil price also increased 0.5% to $96.30 per barrel. On the data front, US PPI, jobless claims reports are due today. Also, Atlanta Fed President Raphael Bostic is expected to speak on Friday.

European Commission Director General for Trade Weyand commented Thursday, that EU is working together with the US to enforce economic sanctions against Russia. She noted that US and EU officials plan a third meeting in the coming months to put the sanctions in new concrete projects. In the meantime, US Treasury Secretary Yellen said that Russia’s war in Ukraine posed the “greatest challenge” to the global economy. As the uncertainty persisted over gas supplies of Russian gas to Europe, European gas prices edged higher. No decision on Russian oil prices has been made so far. Russian stock market rebounded this morning from its lowest level since the start of the invasion to Ukraine led higher by oil giant Lukoil. IMOEX was up 0.8% at 2,091 paring this week’s losses to 6% and this year’s losses to 45%.  Apart from Lukoil, the best performers were Sberbank, metals producer Norilsk Nikel and an Internet company Yandex. Russian ruble gained for the fifth day against US Dollar and Chinese Yuan with Russian Central Bank reporting a significant increase in Moscow trading. Both USDRUB and EURRUB traded close to 58. 10-year benchmark ruble bonds yield for bonds trading inside Russia was up 4bps at 8.45%. From today Moscow Exchange will resume trading in Eurobonds of the Ministry of the Russian Federation and bonds of the VEB.RF issued under the local law and denominated in foreign currency. These bonds will settle in US Dollar, Euro and Russian rubles.

Bunds open weaker following trend from yesterday. The 10Y touched a high of 1.25% before dropping to 1.24%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.268% before retreating slightly to 3.267%, less than 1 basis point firmer intraday. Stocks faltered following High US inflation result for June solidifying Feds quest for more aggressive rate hikes that could set off an economic recession. Consequently, the Stoxx 600, opened lower at 411.54 compared to previous session’s closing of 412.81.

SSA yet weaker as risk sentiment took a hit following a US CPI overshoot as June recorded 9.1% YoY increase. ZAMBIN (-0.75pts) continues in weakness even as creditors meet for a second time today for debt restructuring talks. The government expects IMF board approval for the $1.4 billion programme by September.

Activity in the Nigerian local Secondary Market for Bonds was tepid amid a lingering weak system liquidity. We saw mixed performance across the curve with improved offers on the short to mid end while the long end had some bullish sentiments.  Intraday, average yields were mostly higher across board.  Consequently, FGN 25s closed at an offer rate of 10.30%,5 basis points up from previous level of 10.25% while 50s closed at an offer rate of 13.00%, 3bps down from previous level of 13.03%. Activity in the Secondary Market for Treasury bills was mixed as frailty in money market liquidity persisted. Day-on-day, average discount rates slightly higher across board. Consequently, discount rates on 3rd of October 2022 SPEB & 28th of November 2022 SPEB were at 10.50% (previous: 10.50%) and 11.05%(previous:10.80%) respectively. Meanwhile, PMA maturities printed at 2.75%(previous:2.40%), 4.00%(previous:3.79%) & 7.00%(previous:6.07%) for the 91,182- and 364-day tenors respectively. Market is expected to remain largely bearish pending cash injections into the system. Finally, the exchange rate between the naira and the US dollar closed at N422.86/$1 at NAFEX compared to previous session’s level of N424.63/$1, an appreciation of circa 0.42%.