The UST held on to its gains, while the S&P 500 closed 2% lower owing to comments from the Federal Reserve Chiefs and remarks from a top U.S infectious disease official about reopening the country. It is worth nothing that most equity markets are coming under immense renewed pressure as some investors continue to debate whether the rally seen from March lows has gone too far. Fed Chairman Jerome Powell is due to speak today and may likely offer fresh cues on the outlook for the world’s largest economy, and its monetary policy plan going forward.
Back in March the U.K economy shrank by c.6% when it went on its shutdown due to the covid-19 pandemic, leading to what may be their deepest recession ever in over three centuries. GDP fell by 2% in Q1, piling more gloom on its already tepid economy with dominant services industry shrinking by 6.2% while manufacturing contracted 4.6% and construction lost 5.9%.
Across Europe, governments this week from Spain to Switzerland, will begin to ease their lockdowns and rather predicting a snapback in growth touted by most officials, steps would have to be taken as long as the virus continues to remain a threat to public health. The outlook was underscored by the European Commission’s May 6 forecast for an unprecedented 7.4% economic contraction in the European Union this year, the worst slump in its history. Even that dire prediction assumes lockdowns across the continent will gradually ease with the virus under control.
Iraq has taken the lead in cutting oil supply to the very much prized Asian market as the global deal to curb output has continued to kick in. This was a usual move for OPECs second biggest oil producer. Kuwait, which is another OPEC member, will also begin to supply less to Asian buyers from June and these cuts will remain in place for the rest of 2020. In an additional measure, Kuwait Petroleum Corp. also told customers that a minus 5% operational tolerance limit will be applied to all cargoes nominated for June loading.
In the SSA space, Nigeria, most locals went into a profit-taking frenzy in reaction to the fact that yields on the Nigerian Sovereigns touched single digits, this was despite oil trading near a five-week high yesterday and the expectations that prices on their Sovereign bonds would go higher up. Improved supply in the Sovereign debt market saw yields across the curve close higher by c.70bps on the average compared to the rest of their counterparts (ANGOLA & GHANA) who outperformed.