US equities mixed, bonds yields rise as investor sentiment remains weak

U.S. stocks ended mixed on Tuesday with Dow Jones having its fifth day of gains. After getting off to a wobbly start, U.S. stocks swung higher as a rally in retailer stocks helped lift two of its benchmarks, Dow Jones, and S&P 500 to their highest levels in more than three months. Subsequently, Dow Jones increased 0.7% to finish at 34,152.01, S&P 500 increased 0.2% to finish at 4,3058.20, while Nasdaq declined 0.2% to finish at 13,102.55. The 10-year yield Treasury increased from 2.79% to 2.84%. Gold spot price traded $5.40 lower to $1,792.70 per ounce while WTI crude oil declined $1.01 to $88.40 per barrel. Economic data released yesterday showed U.S. housing fell 9.6% in July, while building permits were down 1.3%. In addition, industrial production increased by 0.6% in July.

President of Ukraine Volodymyr Zelenskiy is due to meet with Turkish President Recep Tayyip Erdogan and United Secretary-General Antonio Guterres in Lviv in western Ukraine on Thursday. A statement from the Turkish presidency said they will discuss “possible steps to end the Ukraine-Russia war through diplomatic means”. Nearly six months into the war, Russia’s campaign is making slow headway, while the intensifying Ukrainian pressure on Kherson has forced the Kremlin to divert troops to the south to shore up positions. The Ukrainian strategy of drawing in and cutting off Russian troops may continue for months of positional attacks to wear down occupying forces. An adviser to Zelenskiy said that the war may go on till the New Year and probably to next summer to achieve the “complete liberation”.  Russian stock market opened higher this morning following advances in oil prices, but as the general sentiment started deteriorating on the back of UK Inflation hitting double digits for the first time in 40 years, Russian shares traded lower with IMOEX losing 0.07% to 2,207. Precious metals mining companies Polymetal and Polyus gained along with VTB, Sberbank and energy giants Gazprom, Novatek and Lukoil. Automobile company Sollers lost as much as 1.85%. Russian ruble traded mostly sideways with market participants weighing the impact of the return of investors from “friendly” countries to the local bond market. Both USDRUB and EURRUB are down this morning at 60.77 and 61.86 respectively. 10-year benchmark ruble bond yields lost 4 bps to 8.37%. According to Reuters, at least six Wall Street Banks have started dealing in Russian bonds again, after US authorities gave a reprieve to investors stuck with the now-toxic debt. Both sovereign and corporate bond prices have been creeping higher with benchmark Russia 47 now offered in low 60s.

Bunds open weaker following trend from yesterday. The 10Y touched a high of 1.06% before dropping to 1.05%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.06% before retreating to 3.05%, 1 basis point firmer intraday. Stocks advanced as investors evaluated future monetary policy actions that central banks’ may embark on while trying to gauge if inflation has peaked. Consequently, the Stoxx 600, opened higher at 443.73 compared to previous session’s closing of 443.07.

The space opens weaker continuing where it left off from yesterday’s closing as risk continues to pull back with flows. Much of the focus in the space yesterday was the fallout from the election results in Kenya which saw its curve retrace some of the selloffs we had seen at the start of the week before Odinga rejected the results saying it was null and void. We continue to pay attention as to what the aftermath would be in the coming days in Kenya. NGERIA (-.675) and ANGOL (-.325) saw the most risk pull back yesterday as both closed -2.50pts and -2.00pts down from opening levels although by closing we had a bit RM and HFs adding risk. Today we get the FOMC minutes for the previously conducted meeting in July but there is no huge expectation that may sway pricing before upcoming September meeting.

Activity in the Nigerian local Secondary Market for Bonds was moderate following the outcome of previous days auction stop rates. We saw improved offers across board as traders adjusted their rates upwards to reflect current market conditions. Intraday, average yields were up 6 basis points across board.  Consequently, FGN 25s closed at an offer rate of 12.45% ,30 basis points up from previous level of 12.15% while 42s closed at an offer rate of 14.00%, 20 bps up from previous level of 13.80%. Activity in the Secondary Market for Treasury bills was average amid a relatively stable system liquidity level. Most of the activity hovered around OMO and SPEB maturities.  Consequently, discount rates on 29th of August 2022 SPEB & 28th of November 2022 SPEB were at 12.50% and 12.25% respectively. Finally, the exchange rate between the naira and the US dollar closed at N428.88/$1 at NAFEX compared to previous session’s level of N427.88/$1, a depreciation of circa 0.23%.