US equities finished lower as concerns over high inflationary pressures outweighed the quest to hunt for stocks that are beaten down. Consequently, the S & P 500 lost 4.04%% to close at 3,923.68, NASDAQ 100 declined 4.73% to close at 11,418.15 while DOW dropped by 3.57% to 31,491.07. Oil bounced back after a 2 day drop with Brent crude rising 1.3% to $110.49 per barrel. The yield on 10-year USTs dropped 2bps to 2.87% as traders gauged the effect of hawkish Fed campaign to combat inflation versus economic growth concerns and gloomy risk sentiments. However, Gold regarded as a haven asset fell 0.1% to $ 1,813.89 an ounce. Investors continue to worry about stagflation risks as Fed officials reiterate that tighter monetary policy is imminent.
Three months into Russia’s invasion of Ukraine, Russia has become one of the most sanctioned countries in the world. However, thanks to the surging energy prices, so far, Russia has been able to stabilize the ruble and minimize sanctions’ impact on consumers. At the same time the EU has failed to agree on the 6th package of sanctions against Russia, as Hungary kept its opposition to an oil embargo. As reported by the Central Bank of Russia, the inflation rate in April has increased by 1.14% to 17.8%, which made the annual inflation rate slightly above the target. The Russian Central Bank is expected to lower the interest rates at its next meeting on the 10th of June from 14% to 12%. Russian ruble has continued to gain, as capital control measures and sanctions on Russia’ financial system have disrupted the imports and made Russian currency the best performer among EM peers. Ruble was up 0.2% this morning against the USD at around 63.50. Russian stocks have snapped the four days of gains and dropped 1.2% this morning to around 2,415 level led by losses of Lukoil, Yandex and Sberbank. The stocks gained some of the ground back later to 2443 level. After a sell off yesterday, Russian sovereign bonds prices have stabilized at lower levels with Russia 28 trading in low 20s and Russia 47 high teens. In the meantime, US treasury secretary Janet Yellen has confirmed, that it is unlikely, that the US will allows Russia to continue bond payments on its foreign currency debt. No final decision has been made yet. The US is set to allocate 40 billion dollars to help Ukraine’s reconstruction while the EU has announced its plans to issue bonds in the amount of 30 billion euros to aid the country. Ukrainian bonds have gained on the news with UKRAIN 22 trading in mid 70s and UKRAIN 32 in high 30s.
Bunds open stronger retracing trend from yesterday. The 10Y touched a high of 1.045% before dropping to 0.946%, 9bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.91% before retreating to 2.84%, 7 basis points firmer intraday. Stocks opened lower amid a massive selloff in US stocks making worse concerns of a global economic slowdown which in turn eased the demand for risk assets. Consequently, the Stoxx 600, opened lower at 426.62 compared to previous session’s closing of 433.95.
SSA opens on a much weaker note as risk sentiment turned negative with US Treasury Secretary Janet Yellen sounding stagflation concerns. GHANA underperformed the space yesterday and opens in like fashion down 0.75pts. ZAMBIN opens flat with the central bank having held the benchmark rate as inflation continues to buck global trends and slowing to 11.5% in April – the lowest since end-2019.
Activity in the Nigerian local Secondary Market for Bonds was quiet; however, we saw some demand trickle in around the mid end of the curve. Intraday, average yields were up by 8bps across the curve. Consequently, FGN 49s closed at an offer rate of 13.10%, up 10pbs from previous session’s level of 13.00%. Secondary Market for Treasury bills was muted with a bearish undertone due to frail system liquidity level. Day-on-day, average discount rates were mostly unchanged across the curve. The exchange rate between the naira and the US dollar closed at N417.28/$1 at NAFEX compared to previous session’s level of N416.86/$1, a depreciation of circa 0.10%.