Negative news emanating from the ongoing war in Ukraine and a flaming inflation data from the U.S. did not deter markets from stepping away from the risk off mode. As expected, US inflation rose to 7.9% in February from 7.5%, the highest seen in the last 40 years. S&P 500 futures rose 0.5% while Nasdaq 100 futures went up 0.5%. Although crude oil prices have declined, imminent inflationary pressures have increased the chances of a more aggressive measure from the FED. WTI was at $107.14 per barrel. The Federal Reserve is expected to hike interest rates next week. Demand for haven assets eased as USTs remained stable with the 10-year yield at 1.98% while Gold dropped by 0.7% to $1,982.72 per ounce. Investors are still worried about the risks to the global economy from the rise in commodity markets due to the Russia/Ukraine conflict that has lingered on in the last few weeks. Inflation seems to be the main cause for concern as the FED may grapple with it if economic growth starts to weaken.
Bunds open steady after yet another bout of selling on Thursday after the ECB’s hawkish rhetoric at their monetary policy meeting. Market had largely expected a delay in major decisions given the risks the war in Ukraine poses but the Governing Council decided to bring forward the end of APP to an expected Q3 with June’s EUR20 billion worth of purchases half of the previously planned EUR40 billion in Q2. The ECB did however change the timing of any rate hikes from “shortly after” to “sometime after” asset purchases end giving it more leeway to respond to the impact of the war. 10Y DBRs traded as high as 0.299% following the decision before paring slightly to close at 0.274%, 5.8bps higher on the day. Peripherals open steady as well having sold off on Thursday with 10Y BTPs closing about 1.818%, some 22bps higher on the day.
A rather mixed start to the SSA sovereign space his morning following yesterday’s dispersion in the space. Despite opening firm yesterday across board, the likes of GHANA even though following in the same trend, opened close to a point higher (c.0.75pts) with some firm buying. What followed was a reversal across in the GHANA space. The likes of NGERIA, ANGOL, IVYCST & SENEGL did not follow the same trend as GHANA as they held firm after U.S inflation data report. As expected today, several reversals across the space off the highs in ANGOL, NGERIA, KENINT seen in the past three days of trading while GHANA continues to the bear the brunt/suffer more of a sell-off in the space as it seems attention has now shifted back to FED’s planned seven quarter point hikes priced for this year.
Russian military claimed to have uncovered 30 biological laboratories in Ukraine which can possibly produce bioweapons. Russia called a UN Security Council meeting on the 11th of March. Meanwhile, IMF Managing Director Kristalina Georgieva stated that Russia may default due to imposed sanctions. The Ministry of Finance Anton Siluanov confirmed that Russia will pay external debt in the currency of which it is denominated, but at the same time, bondholders from the list of «unfriendly countries» will be paid in rubles at the exchange rate of the CBR.On March 16, another payment on Eurobonds with maturity in 2023 is to be made. If Russia pays its debts in rubles, it may mean a default. RUBUSD rose 3% from 120 to 116 level, MICEX remains closed for the last 2 weeks. The Russian prosecutor general announced on Friday an inspection of some 300 foreign businesses that have suspended work in Russia due its invasion of Ukraine. According to state media, the withdrawals will be regarded as a premeditated bankruptcy. Negotiations between Russian and Ukrainian Foreign Ministers Sergei Lavrov and Dmitry Kuleba ended in Antalya with no result.