U.S. market under the pressure, Fed keeping hawk tone

Negative sentiment returns as future Fed tightening moves front and centre. Initial jobless claims for the week ended Dec. 17 rose less than forecast, as a sign of strength in the labour market. US GDP in the third quarter was revised up to 3.2% – compared with the previous estimate of 2.9%. High-tech sector was under the pressure on Wall Street due to negative forecasts from microchip maker Micron Technology. The Dow Jones dropped 1.05%, to 33,027.49 level, the S&P 500 fell 1.45%, to 3,822.39, while the Nasdaq Composite fell 2.18%, to 10,476.12 points.

The index of consumer confidence in the US published the day before amounted to 108.3 in December vs 104.1 and 100.1 in the previous 2 months. The current situation index, based on consumer assessments of current business and labour market conditions rose to 147.2 from 138.3 last month. An index of expectations based on short-term consumer forecasts for income, business and labour market conditions improved to 82.4 from 76.7.

Russia may reduce its oil output by 500-700k barrels a day in early 2023 in response to the Group of Seven’s price cap on its crude exports, Deputy Prime Minister Novak said on Thursday. While Novak described the potential output declines as “insignificant”, a cut of that size is able to tighten global oil supply at the time of China’s demand rebounding. In the meantime, Russian forces continued counterattacks along the Kreminna-Svatove line in the east of Ukraine and mounted further attacks around Bakhmut and Avidiivka close to Dontesk. Russian stock market traded lower again this morning posting the six weeks of losses, the longest streak since 2017. IMOEX lost 0.39% to 2,115, while RTSI was up 1.57% to 986.  Energy giants Lukoil and Rosneft were among the biggest contributors to the slide along with metal producer Norilsk Nickel and gold miner Polyus, as well as Sberbank. Gazprom was an outsider and was slightly up. Russian rouble was stronger this Friday morning both against US Dollar and Euro with USDRUB down 1.3% to 67.65 and EURRUB down 1.82% to 71.76% The end of the tax period is probably coming into play at the end of the year and contributing to the rouble strength. Russian bond yields were slightly lower with 10-year benchmark rouble bonds down .5 bps at 10.335%. Data wise, the Russian economy is set to contract 5.9% in 4Q with overall 2022 contraction now expected down from 3.6 to 3.3%.

European markets open mostly flat on Friday ahead of a long weekend while investors still focused on latest inflation data. Germany’s consumer sentiment is set to show a small improvement in January, according to the forward-looking index released by the GFK institute earlier. On the stock markets the DAX index in Germany traded 0.3% higher at 13,967.23 level, the FTSE 10 in the U.K. added 0.17% to 7,486.20 points while the CAC 40 in France climbed 0.11% to 6,525.18 level. Economic data released this week has helped the European markets approach the close of the year with a degree of optimism that the recession expected for the region in 2023 may not be as bad as first feared.

SSA opens firmer continuing the rally into Christmas with bonds opening yet firmer. GHANA (+1.50) again the outperformer as the market remained risk on. The curve opens comparatively muted though as restructuring on GHS debt looks set to be a complicated one – pension funds were exempted from participating in the debt exchange programme as the representative Trades Union Congress had threatened to go on an indefinite strike. On a positive note, the World Bank-backed GHANA 30s will continue to trade with accrued interest with the EMTA reversing an earlier recommendation on flat-trading for all GHANA Eurobonds.

The NTB secondary market closed on a positive note as average yields dropped by 35bps across the curve. Average yields across the short dropped by 100bps while those on the medium & long ends dropped closed flat. The Mar 9, 2023 bill witnessed considerable buying interest. In the OMO secondary market, average yields dropped by 225bps across the curve. Average yields across the short & medium tiers dropped by 320bps & 35bps respectively. Feb 14, 2023 witnessed significant buying interest.

The FGN bonds secondary market closed on a positive note with average yields across the curve, closing lower by 10bps. Average yields on the short, medium & long ends dropped by 1bps, 10bps & 10bps respectively. The Mar 2035 bond was the best performer.