US equities fall, futures rise amid worries on inflation & economic growth

U.S Stocks finished lower, and futures rose as dip buyers surfaced capitalizing on the selloffs witnessed yesterday despite concerns over inflation & economic growth outlook.   Consequently, US stock prices closed negative yesterday with S & P 500 down 3.20% to 3,991.24, DOW 32,245.70, down 1.99% and NASDAQ 100 down by 4.29% to 11,623.25 while futures which show likely opening levels for equities are currently positive with the S&P Futures up at 1.04% (4,028), DOW Futures 0.42% (32,428) while NASDAQ Futures at 12,393.75, up 1.64%. The yield on 10-year USTs was at 3.05% while demand for haven assets eased as Gold fell to $1,860.77 an ounce. Brent crude fell 0.4% to $105.49 per barrel amid worries that Chinese lockdowns will reduce demand coupled with EU’s move to lessen the effect of some planned sanctions on Russian oil over the war in Ukraine. Today, Investors’ focus shifts to U.S. April CPI report due tomorrow and will also be looking for signs on whether inflation is nearing a peak or elevates the threat of a 75bps rate increase by the Fed, rather than the 50bps move markets seem to be comfortable with. On the data front, U.S. PPI, initial jobless claims, and University of Michigan consumer sentiment reports are due Thursday and Friday respectively.

As reported by the European Bank for Reconstruction and Development, Ukraine’s economy is expected to plunge by 30% this year, which means a steeper decline than a 20% contraction predicted in March. The EU will consider the issuance of joint debt to finance the country’s reconstruction. At the same time, US President Joe Biden signed a law that would make it easier for US to send weapons and supplies to Kyiv, while Congressional Democrats drafted a Ukraine’s aid package worth $40 Billion, more than $33 billion that was requested last month. Ukrainian sovereign bonds reacted positively to the news with UKRAINE 22 up 2 % to low 60s and Ukraine 32 up from high 20s to low 30s. Meanwhile, some progress has been made in EU talks with Hungary, where Hungarian Prime Minister Orban was holding up against a proposed oil import embargo on Russia, while Italian prime Minister Mario Draghi headed to Washington to fully back sanctions on Russia despite of his country’s reliance on Russian energy. Russian hostilities have continued in Ukraine with several missiles striking the southern port of Odesa late on Monday evening and fighting resumed in Azovstal in Mariupol. The Russian Ministry of Finance has denied predicting a 12% fall in GDP, as reported by Bloomberg, and noted that they do not produce macroeconomic forecasts. Most Russian markets remain closed for holidays and should reopen tomorrow. Russian stocks closed 0.49% lower to 2,393.03 on Friday, while Russian ruble was also down with USDRUB finishing at 69.40. Russia sovereign bonds remained mostly unchanged with Russia 28 slightly up at higher mid 30s and Russia 47 in mid 20s.

Bunds open stronger retracing the trend from yesterday. The 10Y touched a high of 1.112% before dropping to 1.058%, 5bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 3.069% before retreating to 2.97%, 9 basis points firmer intraday. Stocks opened higher as dip buyers staged a comeback in the face of tighter monetary policy and gloomy economic growth outlook. Consequently, the Stoxx 600, opened higher at 421.60 compared to previous sessions closing of 417.46.

SSA largely rebounding at the open after yesterday’s bout of heavy selling as the US 10Y touched 3.20%. A reversal was observed later in the session as rates came off the day’s highs with short GHANA some 50c off session lows. MOZAM (+.25) getting a lift from a 3-year $456 million IMF programme that should unlock further financing as the country seeks to rebuild after pandemic and terrorist shocks.

Activity in the Nigerian local Secondary Market for Bonds was mixed. Demand for mid end of the curve was sustained while the long end remained relatively steady. Intraday, average yields were down by 7bps across the curve. Consequently, FGN 32s closed at an offer rate of 10.40%, down 5pbs from previous session’s level of 10.45% while 50s closed at an offer rate 12.87%, same as previous session’s level. Secondary Market for Treasury bills was tepid. Improved offers were seen around the short to mid end of the curve, but few trades materialized. Day-on-day, average discount rates were slightly changed across the curve. Consequently, discount rate on 8th Aug 2022 SPEB closed at 3.20% from a previous level of 3.10% while the new 1-year NTB was stable at 4.00%. There will be an NTB auction on Wednesday with a total of N127.5bn on offer across the 3 tenors (91,182 & 364 days). The exchange rate between the naira and the US dollar closed at N417.11/$1 at NAFEX compared to previous sessions level of N416.82/$1, a depreciation of circa 0.07%.