U.S. stocks recovery faded while oil prices rose as traders continued to observe diplomatic efforts being deployed to end the 4-week-old war in Ukraine. The S&P 500 was at 4,463.12 while Nasdaq 100 was at 13, 893.84.WTI crude oil rose 3.2% to circa $108 per barrel as investors gauged the ongoing war as well as other geopolitical tensions. The continued invasion of Ukraine by Russia has fuelled global inflation by sending up prices of essential commodities such as oil and wheat. However, there seems to be a ray of hope as Turkey said that Moscow and Kyiv are moving closer in talks toward a truce. The bond market continues to be cautious about risks from the war and rising U.S. interest rates. The 10-year UST yield rose 3pbs to about 2.18% while Gold considered a haven asset was at $1,922.45 as demand waned. Although markets are hopeful on the ongoing peace talks, uncertainty remains high. Investors are worried that the Fed is hiking rates into an economic slowdown as high inflation remains a major focus. The Federal Reserve will have to contend with inflationary pressures, slower economic growth and geopolitical risks emanating from the Russia-Ukraine crisis. Coming up later today, Federal Reserve Chair Jerome Powell and Atlanta Fed President Raphael Bostic are expected to speak. U.S. initial jobless claims, U.S. durable goods are due this week.
Early spike in DBRs to kick off the week following yet another steady session where the 10Y closed just firmer at 0.373% (-1.2bps); the benchmark bunds touched 0.407% at 07:20GMT. Peripherals opening in similar fashion with 10Y BTPs touching 1.842% at 07.20GMT; the same had traded just firmer on Friday, closing at 1.808% (-1.1bps). Equities ultimately closed firmer, reversing early losses as the session wound down; the Stoxx 600 rose 0.76%; the index opens about flat, up 0.02% at 08.10GMT. Elsewhere, ECB President Christine Lagarde said the ECB is not seeing elements of stagflation even as she acknowledged that energy and food were driving short-term inflation.
Trading on the MICEX resumes today having been suspended since 28 February, albeit only limited to OFZs; the CBR also remarked that it will be buying up the OFZs to mitigate risks to financial stability. According to the CBR non-residents will get permission for operations including selling over the period to 01 April. The ruble in turn firmed to 104.8 from Monday’s opening at 106 per dollar while RUSSIA 5Y CDS dropped from 1650 as at Friday’s close to 1500 level. RUSSIA 28 is trading at 47 level from Friday’s 50 while RUSSIA 47 is down to 25 from 30. LUKOIL 3 ⅞ 2030 decreased from 58 to 56 while GAZPROM 34 now trading about 43 level’s kept the rate at 20% as was expected. Moody’s agency noted that Russia will face strong inflation pressure – March inflation came at 12.5% YoY – and expects a decline in GDP by 7% in 2022 and by 3% in 2023.Negotiations between officials of Russia and Ukraine will continue today after a break over the weekend. In an address earlier on Saturday, Zelenskyy urged Moscow to hold peace talks now, emphasizing that he is ready to meet with Putin at any time. Meanwhile EU governments working a next round of sanctions which can impose an oil embargo on Russia. Negotiations on this issue will be continued on March 24 for summits with NATO’s 30 allies, as well as the G7 during the week.
GHANA (-1.25) leads losses at the open partly reversing Friday’s gains as the government reiterated that it was not planning to go the IMF for a bailout. Local reports on Friday had suggested that a discussion on a possible IMF bailout was on the cards during a meeting of the governing NPP over the weekend pushing GHANA some 4pts up. NGERIA also hogged the headlines with the $1.25 billion issue issuing some 50bps cheaper than the existing curve. After an initial rally which saw bonds bid as much as 1pt above re-offer, the bonds started moving lower as more sellers came to the market with bids closing at par; bids at the open +.125pts even as the rest of the curve is heavy.