Although last week marked some risk off events including the Hong Kong (HK) unrest as Beijing created national security laws in HK and as the US stated it will revoke HK’s preferential trade status under US Law, the main global equity indices still finished the week positive. What was observed in the US equity markets was a shift from lockdown stocks to value stocks with the DOW and SPX outperforming the NASDAQ.
The oil markets corrected on the HK tensions and general risk off tone spurred by the renewed US China political tensions.
Moreover, mid-week last week Russia was rumoured to be considering easing output cuts on surprisingly stronger than expected pick up in oil demand but soon reversed this stance by stating that it’s open to negotiations with Saudi on possibly extending the output cuts.
On the European front, the uniformity of Europe finally came through with the Recovery package proposed by the EC commission of fiscal spending of around 750bn(EUR) worth that is comprised of grants (500bnEUR) but also loans (250bnEUR). In the proposal, the main beneficiaries were countries most affected by the Covid-19 with an observed skew towards Southern Europe (especially Italy and Greece). Peripheral spreads narrowed in effect, especially those of Spain, Greece, Italy, and Romania.
Today oil climbed higher in early morning trading on reports that OPEC+ may extend supply cuts. Winners are investors that picked bonds in Sub Sahara and other high beta countries risk off tone late last week as everything trades a leg higher today with NGERIA 49s given at 94 handle this morning. Angola is also trading higher with Angola 25s mid at 70 handle. A headline came out on Friday on renegotiations on the rescheduling of commercial and sovereign debt commencing after a 3-month COVID induced halt. Angola awaits a pay-out from the IMF which seems to be on a standstill as with suppressed oil prices the debt is deemed unsustainable. Should the headline mean that the negotiations involve talks with China on external loans then this should be considered a positive for the Eurobonds. ANGOLA 28s, 29s, 49s bid 2,3 pts higher than end of last week at 64,63.75 and 64 handles. Newly issued KSA and EGYPT also traded weaker last week and are bid only this morning.
Wish you all a profitable start to your week!!