Dollar soars ahead of Fed minutes, jobs data

US equities closed 2022 in the red with all three major indices registering solid losses for the year. The stock market posted its worst yearly decline since 2008. On the last trading day of the year Dow Jones decreased 0.2% to 33,147, the S&P 500 Index declined 0.3% to 2,840 and Nasdaq went down 0.1% to 10,466. US Dollar declined on Friday but has been gaining on the first trading day of the year against all major currencies, apart from yen with DXY up 1.07% to 104.355. Treasury rates were higher, as the yields on the 2-year and 10-year notes rose 4 bps to 4.42% and 3.88% respectively, while the 30-year bond rate gained 5 bps to 3.97%. Treasury yields moved higher in 2022 amid the aggressive monetary policy tightening by the Fed. Data wise, the Chicago PMI improved more than expected in December, but remained in contraction territory below 50. The index increased to 44.9 from 37.2 in November, which was a better than an expected rise to 40. Tuesday’s main economic release is the US manufacturing PMI for December, but most eyes will be on the Federal Reserve minutes on Wednesday and the US jobs data later this week.

A Ukrainian strike on a Russian military facility in the occupied eastern town of Makiyuvka killed 63 troops housed there, Russia’s defence ministry said, making it one of the deadliest losses acknowledged by Russia. In the meantime, Ukraine warned that Russia may launch more attacks over the Orthodox Christmas Holiday later this week, as it continued to down Iran-made Shahed drones being sent by Russia to the country. Russian stock market advanced on the first day of trading in 2023 as the price of oil rose while cheap valuations countered the impact of the international sanctions and military setbacks in Ukraine. IMOEX was up 0.82% to 2,171 and RTSI was down 0.38% to 967.  Energy companies Rosneft Oil and RusHydro were among the biggest contributors to the gain on Tuesday, along with Sberbank and metals producers Polyus, Polymetal and Norilsk Nickel. Steelmaker Novolipetsk Steel dropped 2.9%, making it the worst performer in the index. Russian rouble weakened against US Dollar, Euro and Yuan with trading activity concentrated in the yuan-rouble pair. USDRUB was up 0.77% to 70.67 and EURRUB was up 0.35% to 74.65. Russian bond yields were lower with a 10-year benchmark rouble bonds down 7.5 bps to 10.285%.  In other news, Russia gas exports to countries outside CIS plunged 45.5% in 2022 with exports to Europe drastically reduced because of the sanctions.

European stocks opened mixed this Tuesday, as investors returned from a festive period and digested the economic outlook for the new year. World stocks inched higher, European bond yields dropped and the dollar held firm in light trading following warnings from the International Monetary Fund’s managing director that a third of the world will fall into recession in 2023. DAX futures traded 0.6% lower, CAC 40 futures dropped 0.6%, while the FTSE 100 rose 0.2%. Investors have been focusing on the contradictory implications of China’s opening and a resurgence in COVID-19 cases, and the potential impact on Europe given the importance of this export market to some of the region’s biggest companies.

The NTB secondary market was quiet as average yields closed flat across the curve. The average yields across the short, medium & long tenors remained unchanged. In the OMO secondary market, average yields also closed flat across the curve with the short, medium and long ends remaining unchanged. The FGN bonds secondary market closed on a flat note with average yields across the curve, closing flat. Average yields on the short end dropped by 1bps while the medium & long ends closed flat. The Mar 2024 & 2025 bonds were the best performers.