The lingering war in Ukraine and the imminent U.S. FED monetary tightening stance sent stock futures southwards. The S&P 500 futures fell 0.6% while the Nasdaq 100 contracts dropped circa 0.5%. High inflation combined with a volatile rise in commodities due to the war in Ukraine, and the Fed’s expected rate hike this week, are putting pressure on the markets. The rally seen on some commodities in the last few weeks slowed down. Crude oil price fell below $100 per barrel just as traders considered meetings between Ukraine and Russia that could palliate the conflict. Demand for haven assets like Gold continued to ease amid rising yields in USTs. Gold dropped 0.9% to $1,934.27 an ounce while the yield on 10-year Treasuries was at 2.10%. Investors expect some market volatility ahead as the FED has to consider stimulating economic growth whilst managing inflationary pressures and geopolitical risks. Meanwhile, Chinese stocks suffered another round of selloffs on worries about links with Russia and persistent regulatory pressures.
Bunds opened firmer (0.354% at 07.30GMT) following Monday’s selling as market focus turned to a likely hawkish FOMC following indications from both Russia and Ukraine that an agreement could be close; 10Y DBRs closed 11.9bps higher at 0.368%. Peripherals also moved weaker with 10Y BTPs gaining 11.2bps to close at 1.880%. Equities managed to move higher as geo-political concerns eased with the Stoxx 600 gaining 1.20%. On the data front we had French CPI for February just slightly overshooting at 4.2% YoY (vs expected 4.1%); also out today will be Eurozone and German ZEW economic sentiment for March as well January industrial production for the euro area.
The United States may impose a full embargo on Moscow, as well as close international waterways to Russia. US officials said that the Washington would continue to take actions to put pressure on Russia’s financial system. Norilsk Nickel, Rosneft, Gazprom, Severstal, NLMK and Russian Railways have received a permission from Ministry of Finance to pay debt in foreign currency and have already begun paying. At the same time, many Russian Eurobonds holders cannot receive money, as Euroclear and Clearstream have suspended transactions pending clarification from the regulatory authorities. RUBUSD is up by 2.6% from 114 to 111 level. Meanwhile, Russian government has introduced a ban on export of grains and sugar from Russia until August 31 to protect domestic market. This can seriously affect food prices. The Ukrainian president noted that the latest negotiations with Russia have been positive, and the next round of conference will continue today.
The space opens mostly flat after Monday’s uptick. NGERIA overcame early lethargy to close firmer in yesterday’s session following Fitch’s affirmation of the rating at B with a stable outlook; the curve was up about 25c on average as Fitch noted that higher crude prices will improve the fiscal position. The rest of the space was mostly firmer with KENINT one of the outperformers together with fellow non-oilers IVYCST and SENEGL, having lagged oilers since war erupted in Ukraine. KENINT and REPCAM firmer however with the latter having received $100 million from the World Bank to stave off a food crisis.