US stocks finished higher yesterday. However, futures are on a decline amid concerns on how assertive central banks will need to be to moderate prevailing high inflation without stunting economic growth. Consequently, US stock prices closed positive yesterday with S & P 500 up 2.47% to close at 4,158.24, DOW at 33,212.96, up 1.76% and NASDAQ 100 up by 3.33% to 12,131.13 while futures which show likely opening levels for equities are currently negative with the S&P Futures down 0.34% (4,140.75), DOW Futures 0.36% (33,038.00) and NASDAQ Futures at 12,66900, down 0.07%.  The yield on 10-year USTs rose by 8bps to 2.81% on Fed’s hawkish moves, at the same time, Gold was at $1,859.40 an ounce. Meanwhile, Brent crude rose 1.3% to $123.30 per barrel following the EU’s decision to seek a partial embargo on Russian oil in reaction to the invasion of Ukraine. And finally, Federal Reserve Governor Christopher Waller reiterated that he was open to keeping raising interest rates by 50bps pending when inflation starts to moderate close to the central Banks desired rate.

European Union has agreed on a partial ban on Russian oil, which would cover 2/3 of oil imports from Russia. The 6th package of EU sanctions would forbid the purchase of crude oil and petroleum products from Russia if it is delivered by sea but would temporarily exclude pipeline crude. The sanctions would still need to be formally adopted by all 27 European nations on Wednesday. A new package of EU sanctions will also include cutting the biggest Russian lender, Sberbank, off SWIFT and would also target Credit Bank of Moscow and the Russian Agricultural Bank. Following this news, Russian stocks traded lower with IMOEX losing around 1.21% to 2,371. Lukoil, Rosneft, Tatneft and Sberbank lost the most. Russian sovereign bonds prices have remained stable with Russia 28 trading in mid-high 20s and Russia 47 on high teens to low 20s amid Russia’s preparation for bonds holders to bypass the Western infrastructure. The proposals would allow foreign investors to open accounts in Russian banks in both rubles and foreign currency and access funds without restrictions. The mechanism is still being discussed by the Russian government. Russian ruble has bounced back after a three-day slump with both USDRUB and EURRUB remaining on the back foot. Both pairs have lost around 1 ruble Wednesday morning and trade around 61.30 and 62.85 respectively. Trade Balance continues to drive the ruble with a sharp rebound in imports unlikely.

Bunds open stronger retracing the trend from yesterday. The 10Y touched a high of 1.09% before dropping to 1.03%, 6bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.96% before retreating to 2.91%, 5 basis points firmer intraday. Stocks opened lower as concerns over high inflationary pressures and hawkish central banks cancelled out the attraction for cheaper valuations. Consequently, the Stoxx 600, opened lower at 444.69 compared to previous session’s closing of 446.57. On the data front, Euro zone CPI is due today.

A weaker open to SSA as rates tick higher with treasuries resuming trading some 10bps up from Friday’s closing levels. Yesterday’s session saw the space trade broadly firmer in the absence of much liquidity with NGERIA outperforming, up 0.625pts; the same opens 0.375pts down with the long particularly heavy. Elsewhere, Kenya raised the benchmark rate to 7.5% – the first such raise in 7 years – as April inflation rose to 6.5%; KENINT’s run of firming also ends, with bonds opening 0.25pts lower.

Activity in the Nigerian local Secondary Market for Bonds was moderate amid a relatively weak system liquidity. We saw demand come into the market as traders handpicked some securities. Intraday, average yields were down 5bps across the curve. Consequently, FGN 26s closed at an offer rate of 10.60%, down 10pbs from previous session’s level of 10.70% while 49s closed at an offer rate of 13.00% down 5bps from previous session’s closing of 13.05%. Activity in the Secondary Market for Treasury bills was relatively calm with some bearish sentiment as Money Market liquidity declined to about N123bn. Demand for securities eased across most of the curve. Day-on-day, average discount rates were mostly unchanged. Consequently, discount rate on 8th August 2022 SPEB and 25th of May 2022 NTB were at 5.00% and 6.05% respectively. The exchange rate between the naira and the US dollar closed at N418.30/$1 at NAFEX compared to previous session’s level of N418.77/$1, an appreciation of circa 0.11%.