U.S. equities finished choppy session with losses as OPEC+ announces large output cut
U.S. stocks finished lower on Wednesday while data showed steady growth in private-sector jobs and service sector indicating more scope for the Fed Reserve to continue with its interest rate hike. The data released showed that private-sector payrolls rose by 208,000 in September. The economic calendar showed ADP private sector job growth was roughly in line with forecasts ahead of Friday’s key labor report. Crude oil prices are higher as OPEC+ met yesterday and agreed to cut production by 2mmbd, the largest amount since 2020.
Subsequently, Dow Jones declined 0.14% to finish at 30,273.87, S&P 500 declined 0.20% to finish at 3,783.28 while Nasdaq 100 declined 0.25% to finish at 11,148.64. The 10-year yield Treasury advanced to 3.75%. Gold spot price declined $13.70 to $1,716.80 per ounce while WTI crude oil price increased $1.32 to $87.84 per barrel.
The European Union has approved a fresh package of sanctions against Russia that included a price cap on oil sales. In his response, the Deputy Prime Minister Alexander Novak said a price cap on Russia’s exports would backfire and might lead to a temporary cut in production. Novak stressed that Russia will not sell oil to any countries that adopt a cap. In the meantime, Ukrainian forces pressed through Russian defensive lines in the southern region of Kherson and liberated several towns in Luhansk. In his nightly address Ukrainian President Zelenskiy said that Ukrainian army is carrying out a “pretty fast and powerful advance”. Russian stocks gained as oil held to a three-day rally after the OPEC+ agreed to the biggest production cut since 2020, while Russia warned that it will not sell crude to counties adopting a price cap. IMOEX was up 0.87% to 2,048 and RTSI was up 0.42% to 1,066. Energy companies Gazprom, Lukoil and Rosneft led the gains along with Internet company Yandex. Russian ruble was weaker against US Dollar, Euro and CNY with USDRUB up 0.31% to 60.48 and EURRUB up 0.6% to 59. Russian bonds yield also traded lower with 10-year benchmark bonds losing 3bps to 9.8%, as investors switched from safety of bonds into buying stocks. In other news, London Metal Exchange has restricted new deliveries of copper and Zinc from Ural mining company UMMC and Chelyabinsk Zinc Plant following UK sanctions on Iskander Makhmudov controlling the companies. The prices of metals on LME rose following the news with Aluminum futures rising 2.85%. There is a potential that LME could stop Russian metals trading altogether.
The European stocks finished lower on Wednesday. Eurozone and U.K. inflation rates in double digits and there is more pass through from wholesale energy prices to come, despite governments intervening more forcefully. Market strategists believe weaker exchange rates, rising input prices and real wage resistance, workers resisting cuts to real term pay by demanding pay raises could all add to core inflationary pressure.
The German Dax dropped 1.21% to finish at 12,517.18, FTSE 100 index dropped 0.48% to finish at 7,052.62 while French CAC 40 index declined 0.90% to finish at 5,985.46.
The U.K. 10-year gilt yield declined 4.30bps to 4.033% while the German 10-year bund declined 0.085bps to 2.03%.
SSA swings back to positivity with a firm open after Wednesday’s reversal. Brent closed just shy of $94/bbl following OPEC+’s decision to cut 2mmbd during yesterday’s meeting. Oilers ANGOL (+.25) and NGERIA (+.25) up consequently, reversing drops of over 1pt seen on Wednesday. Nigeria’s Stanbic IBTC-S&P Composite PMI rose to 53.7 in September from August’s 52.3, marking a third straight month of expansion.
The NTB secondary market closed on a flat not with average yields remaining at same level with little buying interest. The bonds market closed with higher yields, closing 15mins higher across the curve.