US stock futures rebound on China’s step to support economy

US Stocks finished lower. However, futures bounced back after China’s latest plan to boost its economy brought back some appetite for risk assets. Consequently, US stock prices closed negative yesterday with S & P 500 down 0.58% to 3,900.79, DOW 31,253.13, down 0.75% and NASDAQ 100 down by 0.26% to 11,388.50 while futures which show likely opening levels for equities are currently positive with the S&P Futures up 1.06% at 3,939.00, DOW Futures 0.86% at 31,470.00 and NASDAQ Futures at 12,055.25, up 1.49%. The yield on 10-year UST’s rose 3pbs to 2.86%, at the same time, Gold rose 0.3% to $1,846.48 an ounce. Meanwhile, Brent crude fell 0.3% to $111.65 per barrel. Investors are still worried about an economic downturn as the Fed raises interest rates to control inflationary pressures.

Germany’s finance minister said the Group of Seven will support Ukraine with more than $19 billion, while US president Joe Biden welcomed a congressional passage of $40 billion in aid for Kyiv and announced a new package of weapons to be sent directly to the front lines. A top Russian official said that Russia was on the way of taking all the Donetsk and Luhansk regions of Ukraine despite of heavy losses suffered by the Russian forces. Russian ruble has extended its gains and strengthened past the level of 60 against the USD. USDRUB is currently trading at around 59.25 and EURUB is at 61.30. EURRUB has earlier broken 61 level for the first time since April 2017. A strong currency could present a problem for Russia’s budget. In response to the recent gains, the Central Bank of Russia has eased currency controls for the members of the public. Russian stocks lost 1.15% this morning with IMOEX trading just above 2400 mark. Transneft and Inter RAO were the gainers, while Polyus declined. Elevated commodity prices and China boosting sentiment by lowering a key interest rate should help the Russian stock market to hold on to a weekly gain of around 5%. It is down 36% this year. Russian sovereign bonds prices have stabilized with Russia 28 trading in low 20s and Russia 47 in high teens. The US appears to be poised to push Russia into a sovereign default despite Moscow’s claims that such default would be “artificial”. While an immediate effect of such default would be minor for Russian economy, it could help the West to seize Russian assets abroad.

Bunds open weaker retracing trend from yesterday. The 10Y touched a high of 0.992% before dropping to 0.970%, 2bps down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open; 10Y BTPs yields went as high as 2.900% before retreating to 2.870%, 3 basis points firmer intraday. Stocks opened higher as dip buyers resurfaced to scramble for bargains amid optimistic valuations. Consequently, the Stoxx 600, opened higher at 433.62 compared to previous session’s closing of 427.99.

Another weak open to SSA this morning, albeit comparatively muted compared to yesterday’s pummelling. GHANA shed some 3pts with the curve further inverting; it opens with a slight bounce from yesterday’s lows. SOAF (+0.25pts) also rebounding today after the central bank hiked the benchmark rate by 50bps during yesterday’s MPC meeting.

Activity in the Nigerian local Secondary Market for Bonds was mixed. We saw improved offers across the short end while the long end remained relatively stable. However, we saw little demand trickle in around the mid end as traders’ cherry picked some maturities. Intraday, average yields were slightly up by 1bp across the curve. Consequently, FGN 29s closed at an offer rate of 11.20%, down 10pbs from previous session’s level of 11.30% while 50s closed flat at 12.87%. Secondary Market for Treasury bills had mixed sentiments amid a relatively weak system liquidity. Demand eased across the short end of the curve while the long end saw some demand with minimal trades done. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rates on 11th July 2022 SPEB closed at 3.30% compared to last session’s closing of 3.10% while 7TH Feb 2023 OMO closed at 4.60% compared to last session’s closing of 4.70%. The exchange rate between the naira and the US dollar closed at N417.50/$1 at NAFEX compared to previous session’s level of N417.27/$1, a depreciation of circa 0.05%.