Stocks futures drop, bonds yields rise on econonic growth risks

U.S stocks finished modestly higher on Monday as investors sifted through data and comments about the jobs market. Although US stock prices closed positive yesterday with S & P 500 up 0.31% to 4,121.43, DOW at 32,915.78, up 0.05% and NASDAQ 100 up by 0.40% to 12,061.37, futures which show likely opening levels for equities are currently south bound with the S&P Futures down 0.36% (4,105.50), DOW Futures 0.32% (32,804.00) and NASDAQ Futures at 12,539.50, down 0.52.The yield on 10-year Treasury was at 3.048% while Gold declined 0.3% to $1,843.70. Meanwhile, Oil prices ended lower as WTI fell 0.3% to Settle at $118.59 per barrel after trading at a session high of $121.

In retaliation to “constantly expanding sanctions” Russia has “indefinitely” banned 61 US officials and executives from entering the country. The list of banned persons includes Treasury Secretary Janet Yellen and the CEO of BlackRock Larry Fink. Russian authorities have drafted anti-sanction amendments, which would include cancellation of cross-default provision on Eurobonds and the issue of “substitute” securities. Russian Sovereign bonds have been steadily rising with Russia 28 trading in low 30s and Russia 47 up in mid 20s. Russia’s foreign debt has contracted by $2.6 bln year-to date, which is 4.3% of the total outstanding amount of 59.7 bln. Russian stocks have lost some value this morning with IMOEX down 1.44% to 2,249 and RTSI down 1.37% to 1,162.  Gazprom and Lukoil were the biggest losers, while Severstal and Alrosa were the gainers. Russian ruble was little changed with both USDRUB and EURRUB trading slightly lower at 60.86 and 64.65 respectively. Meanwhile, Russian Central Bank will announce its rate decision this Friday. After a 3% GDP decline in April, with capital control measures in place, Russian Central Bank is expected to continue reducing rates. However, a pause in the cycle rates cuts is also not ruled out, as inflation data this week came up higher than expected.

Bunds open weaker following the trend from yesterday. The 10Y touched a high of 1.34% before dropping to 1.31%, 3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.37% before retreating to 3.29%, 8 basis points firmer intraday. Stocks open lower as increase in Bond yields raised worries about economic growth risk. Consequently, the Stoxx 600, opened lower at 442.53 compared to previous session’s closing of 442.53. Focus will be on ECB’s meeting and US inflation data due later this week.

SSA opens on a weaker note following the move higher in treasury yields on Monday where the session closed mixed. Nigeria announced that it will no longer be issuing the planned Eurobond citing market conditions; NGERIA closed flat on Monday and opens 0.125pts lower. GHANA also continuing its run of weakness opening 0.125pts lower.

Activity in the Nigerian local Secondary Market for Bonds was moderate amid a relatively weak Money Market liquidity. We saw demand trickle in around the short end of the curve while the mid to long end had improved offers with minimal trades done. Intraday, average yields were down 4bps across the curve. Consequently, FGN 25s closed at an offer rate of 9.95%, down 5pbs from previous session’s level of 10.00% while 50s closed at an offer rate of 13.05%, up 1pb from previous session’s level of 13.04%. Activity in the Secondary Market for Treasury bills was modest amid a feeble system liquidity of about N178bn. However, we saw fresh interest across the short end of the curve ahead of upcoming NTB Auction. On offer will be N160bn across the 3 tenors (91,182 & 364 days). Day-on-day, average discount rates were mostly unchanged. Consequently, discount rates on 8th of September 2022 NTB and 9th of March 2023 NTB were at 3.55% and 5.20% respectively. The exchange rate between the naira and the US dollar closed at N418.29/$1 at NAFEX compared to previous session’s level of N419.35/$1, an appreciation of circa 0.25%.