US equities rise as consumer’s remain resilient despite inflation risk

US stocks finished higher in spite of uncertainty regarding the eventual outcome of Fed’s monetary tightening effort to combat inflationary pressures. Consequently, the S & P 500 gained 1.99%% to close at 4,057.84, NASDAQ 100 rose 2.68% to close at 11,740.65 while DOW increased by 1.61% to close at 32,637.19. Treasury yields were stable with the 10-year UST at 2.74% while Gold rose 0.4% to $1,858.35 an ounce. Meanwhile, Brent crude fell 0.2% to $117.16 a barrel amid concerns about inflation, China’s seeming gloomy economic outlook and commodity supply disruptions due to the ongoing war in Ukraine.

Investors are due to receive roughly $100 million of interest on Russia foreign debt by this Friday. Russian President Putin said that the payments have already been made, but the licence that allowed American banks and individuals to accept these payments has not been extended by the US Treasury. Focus will be on further developments of the story today. Meanwhile, Russian sovereign bonds have remained mostly stable with Russia 28 holding on to mid-20s and Russia 47 in high tens. At the same time, Russia’s local bonds continued gaining after Russia’s third interest rate cut with the 10-year yield falling to the lowest level since February 10. Russian stocks extended a weekly gain with IMOEX up 0.4% this morning at 2,423. Energy giants Gazprom, Lukoil and Tatneft led the advances, as elevated energy prices and record shipments of oil to China and India have eased investors’ concerns of sanctions and a potential sovereign default. In the meantime, Russian currency rally has halted, as Russian Central Bank cut interest rates on Thursday from 14% down to 11%. USDRUB and EURRUB were both up again this morning and are currently trading at 67.40 and 71.40 respectively.

Bunds open stronger following the trend from yesterday. The 10Y touched a high of 0.993% before dropping to 0.975%, 2bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.85% before retreating to 2.83%, 2 basis points firmer intraday. Stocks opened higher as fresh appetite for risk assets resurfaced due to cheaper valuations. Consequently, the Stoxx 600, opened higher at 438.64 compared to previous session’s closing of 437.71.

SSA opens largely firmer to end a week of rebound. Thursday had seen a continuation of the trend with KENINT (+2.50pts) outperforming and NGERIA (+2.25pts) following. The latter’s fuel subsidy bill went up 97% month-on-month in March to an equivalent $1.26 billion. GHANA tilted towards the downside at the open having seen some supply into the close on Thursday; demand skewed towards short tenors with long bonds mostly offered.

Activity in the Nigerian local Secondary Market for Bonds was mixed amid a relatively weak system liquidity. We witnessed some cherry picking and sell offs across the curve with few trades done. Intraday, average yields were up 1bp across the curve. Consequently, FGN 26s closed at an offer rate of 11.00%, up 40pbs from previous session’s level of 10.60% while 50s closed at an offer rate of 13.10% up 2bps from previous session’s closing of 13.08%. Activity in the Secondary Market for Treasury bills picked up with more trades consummated compared to last sessions trading. We saw improved rates across the curve following the increase in stop rate for the new 1-year bill after yesterday’s auction. Day-on-day, average discount rates were up across the curve. Consequently, discount rate on 3rd October 2022 SPEB was at 3.40% compared to yesterday’s closing of 3.08% while the new 1-year bill traded at 6.00% level. The exchange rate between the naira and the US dollar closed at N418.08/$1 at NAFEX compared to previous session’s level of N418.00/$1, a depreciation of circa 0.02%.