US equities wobble amid China’s plan to moderate Covid induced lockdowns

US Stocks finished lower on Friday. However, Futures rose following China’s move to lessen Covid restrictions, bringing a ray of hope to investors amid worries over inflation and interest rate hikes. Consequently, US stock prices closed negative on Friday with S & P 500 down 1.93%% to 4,108.54, DOW at 34,899.70, down 1.05% and NASDAQ 100 down by 2.47% to 12,012.73 while futures which show likely opening levels for equities are currently positive with the S&P Futures up at 0.64% (4,113.25), DOW Futures 0.48% (33,046.00) & NASDAQ Futures at 12,657.50, up 0.85%. Brent crude rose 0.2% to $119.96 per barrel as Saudi Arabia indicated confidence in demand with a bigger-than-anticipated price increase in Asia amid US governments plan to allow more banned Iranian oil come into the market to cushion the effect of decreasing supplies from Russia. Meanwhile, the yield on 10-year Treasuries was little changed at 2.94% while Gold rose 0.2% to $1,854.38 an ounce. Later this week, US CPI, University of Michigan consumer sentiment is due Friday.

Following a similar initiative from the US, the UK announced that it would send rocket systems to Ukraine that would allow to missiles that could strike targets 80 kilometres away. In response to this, Russian President Vladimir Putin threatened to attack new targets in Ukraine. Russian stocks have mostly been flat this Monday morning with gains in Norilsk Nikel, Rosneft and Lukoil offset by losses in Yandex, Magnit and PhosAgro. IMOEX was slightly down losing 0.22% to 2,303 and RTSI lost around 1.19% to 1,185. On Friday, the EU countries agreed their sixth package of sanctions against Russia, including an import ban on all Russian seaborne crude oil and petroleum products for the next six to eight months. Russia’s National Settlement Depository (NSD) was added to the extended sanctions list and will now stop transactions in euros. As NSD’s accounts with Euroclear and ClearStream have already been blocked for a while, these new sanctions would not mean significant changes for Russian investors but would strengthen the trend of payment on Eurobonds in rubles, one of the Russia analysts commented. Russian Sovereign bonds were up with Russia 28 gaining a few percent to low 30s and Russia 47 moving up to low 20s. Russian ruble weakened towards 61 against the dollar and 64 against the euro on Monday steered by internal markets flows and capital controls on the Russian exchanges. The Russian currency remains much weaker with most banks offering to sell cash dollars and euros at around 85 and 90 respectively.

Bunds open slightly weaker retracing the trend from Friday. The 10Y touched a high of 1.281% before dropping to 1.279%, less than 1bp down day-on-day. Peripherals were little changed; 10Y BTPs yields went as high as 3.289% before retreating to 3.288%, less than 1 basis point firmer intraday. Stocks open higher as China toned down Covid lockdown measures which in turn brought back risk-on sentiments. Consequently, the Stoxx 600, opened higher at 443.06 compared to previous session’s closing of 440.09. On the data front, ECB rate decision and Christine Lagarde’s briefing are coming up on Thursday. Also, ECB is ready to signal an end to Bonds purchases this week, joining other centrals banks monetary tightening campaigns to wade off rising inflation.

SSA opens on a largely flat note following two sessions of thin liquidity at the end of last week. GHANA mostly lower (-0.25pts) barring the usual demand on short tenors. KENINT (-0.125pts) slightly lower as divergent reports on the dollar liquidity situation crop up even as the central bank maintains that it has sufficient liquidity for importers.

Activity in the Nigerian local Secondary Market for Bonds was calm amid a relatively modest Money Market liquidity. We saw some demand trickle in around the short end of the curve while the mid to long end saw improved offers with minimal trades done. Intraday, average yields were up 5bps across the curve. Consequently, FGN 25s closed at an offer rate of 9.97%, down 3pbs from previous session’s level of 10.00% while 42s closed at an offer rate of 13.18%, up 8pbs from previous session’s level of 13.10%. Activity in the Secondary Market for Treasury bills was mild as system liquidity declined to about N347bn from N500bn. We saw mixed sentiments across most of the curve especially the November SPEB and May OMO bills. Day-on-day, average discount rates were mostly unchanged. Consequently, discount rates on 29th of September 2022 NTB and 28th of November 2022 SPEB were at 3.50% and 4.15% respectively. The exchange rate between the naira and the US dollar closed at N419.35/$1 at NAFEX compared to previous session’s level of N418.45/$1, a depreciation of circa 0.22%.