The Federal reserve’s reassurance to investors at the FOMC meeting held yesterday that the US economy can weather the storm amid inflationary pressures and geopolitical tensions sent the prices of stocks northwards. The Fed increased rates by 25bps and indicated rate hikes at all six remaining meetings in 2022. The S&P 500 rose 2.2% to 4,357.86 while Nasdaq 100 went up 3.7% to 13,946.50. The yield on 10-year UST’s fell three basis point to 2.16% over concerns of a recession despite Jerome Powell’s positive pronouncements on growth. Rise in demand for longer term UST’s signals risk aversion which signifies that investors are worried about an economic recession and want to lock-in long term US Government bond yields. The shock in commodity supply from Russia’s war in Ukraine continues to aggravate price pressures and economic risks, foretelling more market volatility. WTI crude rose 2% to $96.99 per barrel while Gold was at $1,932.50, up 0.3% amid ongoing peace talks between Russia and Ukraine. Investors are still concerned about markets even though Powell downplayed the risk of a U.S. recession next year while stating monetary policy can tighten without sacrificing economic growth.
Bunds open steady following yet another bout of selling on Wednesday where the benchmark 10Y closed 0.392%, 6bps higher. Peripherals also steady after a firmer showing however as risky assets found support following China’s comments to support the economy; 10Y BTPs reversed early selling of as much as 6.4bps from Wednesday’s close (1.814%) to end at 1.810%. Stocks continue in firm fashion following Wednesday’s 3.06% gain in the Stoxx 600; the same was trading 0.66% up at 08.05GMT. On the data front, EU car sales hit a record low in February with new registrations shrinking 6.7% YoY – this extended the contraction streak to 8 months. French and Italian sales tanked 13.0% and 22.6% respectively while German sales were up 3.2%. Euro-wide CPI data follows later in the day as well as addresses by ECB’s Lagarde and Lane.
The Ministry of Finance of Russia reported that a payment order to pay the coupon on RUSSIA 23 and RUSSIA 43 in the amount of $117.2 million was executed by a foreign correspondent bank. According to officials of the US Department of the Treasury, sanctions against Russia do not prevent coupon payments on sovereign debt in US dollars until at least the end of May.Russia’s chief delegate, presidential aide Vladimir Medinsky noted that the negotiations with Kiev are hard and slow-going, but Russia is sincere in its wish to achieve peace as soon as possible. Russia is insistent on Ukraine adopting a neutral demilitarized state which will have an army and navy without weapons threatening Russia.RUBUSD rose 4 % from 110 to 104.5 level. RUSSIA 47 increased from 11 to 20 level. RUSSIA 5Y CDS at 2600 bp, Russian credit risk remains extremely high.Remarks by President Biden to label President Putin “a war criminal” will only escalate tensions according to the Kremlin even as White House officials insist this was not an official statement.
The risk-on momentum continues in the space following a largely expected hawkish tilt from the Fed in Wednesday’s FOMC decision. KENINT (+3.00) led gains for yet another session but opens on a rather muted note. Presidential hopeful Raila Odinga had on Wednesday remarked that he would seek to renegotiate terms on the country’s ballooning debt if elected into office during the August elections. IVYCST and SENEGL also moved in lockstep as they capped a positive day for EM risk up 2.50pts each. Oilers also held up even as Brent moved lower to close sub-100, with GHANA’s +1.50 gain the lowest among peers.