U.S stocks closed higher Tuesday, picking up stream late afternoon and shaking off early weakness after a profit warning from retailing giant Target Corp. reinforced worries over the retail sector. US Stocks closed positive yesterday with S&P 500 gaining 1% to finish at 4,160.68, Nasdaq 100 gaining 0.9% to finish at 12,175.23 and Dow Jones adding 0.8% to close at 33,180.14. However, US Equity Futures signalled persisting worries about high inflation and slowing growth with the S&P Futures down 0.4%, Nasdaq 100 Futures down 0.4% and Dow Jones Futures down 0.3%. Gold fell 0.1% to $1,850.07 an ounce while the yield on 10-year Treasuries hovered around 3.008%. Meanwhile, oil prices increased as WTI rose 0.8% to $119.41 per barrel.
The US Treasury has moved to block US investors from making purchases of Russian bonds in the Secondary Market. Previously, US investors were only prohibited from purchases of newly issued Russian government debt and some Russian corporate bonds. Russian sovereign bonds have moved lower on the news with Russia 28 dropping to mid-30s and Russia 47 to low 20s. Russian stock market continued rising for the second consecutive day with Gazprom, Lukoil and Novatek Leading the gains. This Wednesday morning IMOEX was up 1.87% at 2,334 and RTSI was up 3.39% at 1,220. The Bank of Russia raised the limit on Foreign FX transfers for Russian residents and non-residents from friendly countries up to $150,000. Russian ruble strengthened with USDRUB down at 60.30 and EURRUB at 64. In the wake of the Western embargo on Russian oil exports, world prices for oil have soared increasing export revenue for Russian oil producers. As one analyst commented, if some currency controls stay in place, ruble will continue to stay strong. Russia’s Central Bank is widely expected to reduce the key interest rate on the 10th of June down a percentage point to 10%.
Bunds open weaker following the trend from yesterday. The 10Y touched a high of 1.32% before dropping to 1.31%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.28% before retreating to 3.27%, 1 basis point firmer intraday. Stocks open lower on lingering concerns about high inflation and decelerating economic growth. Consequently, the Stoxx 600, opened lower at 442.03 compared to previous session’s closing of 442.88. Focus remains on ECB’s meeting which should give insight into the extent to which interest rates would be hiked.
A flat to weaker open to the space as treasuries resume their selling having rallied 10bps in yesterday’s session. The space closed weaker on Tuesday with KENINT (-1.50pts) underperforming amid the latest string of negative headlines from FX shortages to growth forecast downgrades. KENINT opens flat as Parliament approved Treasury’s proposal to up the debt ceiling to KES10 trillion. GHANA similarly flat at the open following yet another weak session yesterday that saw a rotation of the 30s to longer bonds.
Activity in the Nigerian local Secondary Market for Bonds was calm amid a relatively muted Money Market liquidity. We saw some demand trickle in around the short end of the curve especially FGN 28s while the mid to long end remained steady. Intraday, average yields were mostly flat across the curve. Consequently, FGN 28s closed at an offer rate of 10.75%, down 1pb from previous session’s level of 10.76% while 50s closed at an offer rate of 13.13%. Activity in the Secondary Market for Treasury bills was modest as system liquidity declined to N25bn from N178bn.We saw a mixed performance with bearish undertones across board. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rates on 8th of September 2022 NTB and 9th of March 2023 NTB were at 3.65%(previous:3.55%) and 5.45% respectively. The exchange rate between the naira and the US dollar closed at N419.94/$1 at NAFEX compared to previous session’s level of N418.29/$1, a depreciation of circa 0.39%.