U.S. equities declined amid a confluence of economic events
U.S. stocks ended sharply lower on Thursday, giving back previous day solid advance that was boosted by the BoE decision to purchase bonds to try to stabilize its financial system. Also, an unexpected drop in weekly initial jobless claims seems to be keeping expectations intact as the Fed Reserve will continue with its aggressive interest rate hike. The markets also digested an unrevised Q2 GDP figure that showed a second-straight quarterly contraction, while inflation measures for the quarter were revised higher, and personal consumption was adjusted upward. The latest update to Q2 GDP figures confirmed that the U.S. economy shrank at an annualized clip of 0.6% in the second quarter.
Subsequently, Dow Jones declined 1.54% to finish at 29,225.61, S&P 500 declined 2.11% to finish at 3,640.47 while Nasdaq 100 declined 2.84% to finish at 10,737.51. The 10-year yield Treasury advanced 5.8bps to 3.792%. Gold spot price is at $1,660.5 per ounce while WTI crude oil fell $0.21 to $81.94 per barrel.
Russian President Vladimir Putin will sign treaties to absorb the four regions in eastern and southern Ukraine at a Kremlin ceremony at 3 pm this Friday. Putin will also make an address to legislators and other officials. The decrees will recognize the “independence” of occupied Kherson, Zaporizhzhia, as well as Donetsk and Luhansk. Ukraine and its allies rejected the annexations, pledging to continue weapons supplies to Ukrainian army, which is pressing its counteroffensive aimed at retaking the territories. Ukrainian forces are currently closing on the strategic city of Lyman in the eastern Donetsk region, one of the four being annexed. Fighting continues in all areas which Russia occupies. Russian stock market gained this Friday morning trimming its biggest monthly decline since the invasion of Ukraine, as investors weighed the impact of Russia’s move to annex the occupied territories. IMOEX traded 0.2% higher at 1,957, while RTSI rose 2% to 1,074. Gazprom surged as much as 8.4% on Friday and was the market best performer along with Sberbank and Internet Company Yandex. Fertilizer Producer Phosagro was an outlier, falling as much as 15%. Russian ruble has advanced to the highest level for more than two months despite an announcement by Finance Minister Anton Siluanov that the government may yet make interventions this year. This morning USDRUB lost 0.34% to 56.89 and EURRUB 0.32% to 55.15. Russian local bond yields crept a little higher with 10-year benchmark ruble bonds yields trading again above 10%. In economic news, Russian industrial production contracted less than expected in August showing a slowdown of just 0.1% year-on- year compared to 0.5% in July.
European stock market was choppy with government bonds on Thursday, signaling a potential recovery at the end of a stormy week in markets. Also, European shares edged higher, paring the longest run of quarterly losses since 2009.
The UK currency staged an almost full recovery since the government announced a week ago its sweeping UK tax cuts.
The German Dax dropped 1.71% to 11,975.55, FTSE 100 index fell 1.77% to 6,881.59, Euro Stoxx 50 increased 1.01% to 3,311 and French CAC 40 advanced 1.13% to 5,740.18.
The 10-year U.K gilt yield declined 8bps to 4.06% while Germany 10-year yield declined 4bps to 2.14%.
A muted open to SSA to end what’s been a dreary trading week. KENINT (+.125) just about opening positive; President Ruto pushed for spending cuts of an equivalent $2.49 billion in his maiden parliamentary address. The country’s central bank also hiked the benchmark rate by 75bps to 8.25% against expectations of 50bps in a Bloomberg survey.
The local FI market continued a quiet note as players remained cautious.
There was some activity in the Treasury Bills market as yields closed higher. Rates are the primary auction closed significantly higher on the one-year paper- 12.00% from 9.75% at the last auction.