Oil rises, US equities decline prior to ECB meeting

US stocks finished lower as inflation and the ability of centrals banks’ to tackle it without stunting economic growth remained a major source of concern for investors. Consequently, the S & P 500 lost 1.08%% to close at 4,115.77, NASDAQ 100 declined 0.73% to close at 12,086.27 while DOW dropped by 0.81% to close at 32,910.90. The yield on 10-year USTs was stable at 3.02% while Gold fell 0.2% to $1,849.26 an ounce. Meanwhile, Brent crude was at $123.10 per barrel amid worries about rising cost.

Fighting continued in the east of Ukraine, where the Russian forces are pushing to take the city of Sievierodonetsk. German Health Minister will travel to Ukraine today to coordinate assistance on the ground for people wounded in the war. Russian equities market traded lower today, as global investors weighed elevated oil prices against the concerns about inflation, monetary tightening and the economic impact of the war in Ukraine. IMOEX lost 1.1% to 2,293 and RTSI was flat at 1,231 with Novatek, Yandex and Sberbank being the worst performers. Diamond producer Alrosa slumped as much as 4.5% after its supervisory board recommended paying no dividend for the second half of 2021. Inter RAO dropped by 7.7% as the stock went ex-dividend. Despite of the recent US sanctions prohibiting US investors to buy bonds on the secondary market, Russian sovereign bonds remained relatively stable with Russia 28 offered in mid 30s and Russia 47 in low 20s. The latest round of US sanctions may complicate a pay-out on CDS, which was triggered as Russia missed a $1,9 million interest payment last week. The process typically involves bond holders delivering bonds to the CDS seller but following US sanctions fewer people will be able to bid for the bonds delivered driving the prices lower. Ahead of the interest rate announcement this Friday Russian rouble continued to strengthen with USDRUB renewing a two-week low of 59.10. EURURB was down 2 roubles to 62. A fourth straight cut is widely expected tomorrow, and some analysts predict that Russian Central Bank could lower the benchmark interest rates below its pre-war level of 9.5%.

Bunds open marginally stronger retracing the trend from yesterday. The 10Y touched a high of 1.37% before dropping to 1.34%, 3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open;10Y BTPs yields went as high as 3.30% before retreating to 3.27%, 3 basis points firmer intraday. Stocks open lower prior to ECB’s rate decision with expectations that the central bank will follow a direction of monetary policy tightening as it gears up to end extensive asset purchases. Consequently, the Stoxx 600, opened lower at 437.41 compared to previous session’s closing of 440.37. Center of attention today will be on ECB meeting.

The run of weakness continuing for SSA at the open as core yields remain elevated with 10Y USTs above 3%. The space saw another dour session on Wednesday with KENINT (-1.75pts) again the underperformer as support wanes amid reported FX challenges. GHANA (-0.50pts) wholly lower with the recent bid on short tenors fading and perhaps more notably, bids on 35s and longer going sub-50. Euro-denominated issues for IVYCST and SENEGL (-0.75pts) were particularly under pressure as well ahead of the ECB meeting later today; these and BENIN leading the slide at the open.

Activity in the Nigerian local Secondary Market for Bonds was calm amid a feeble Money Market liquidity. Mild demand for short to mid tenored securities persisted, especially on the FGN 28s & 36s while the long-dated maturities were stable. Intraday, average yields were down by 1pb across the curve. Consequently, FGN 36s closed at an offer rate of 12.60%, down 3pbs from previous session’s level of 12.63% while 50s closed at an offer rate of 13.10%. Activity in the Secondary Market for Treasury bills was moderate as system liquidity remained tight at about N149bn.We saw a mixed performance with more 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 10th of January 2023 OMO were at 3.60%(previous:3.65%) and 4.75%(previous:4.85%) respectively. Meanwhile, stop rates for the various tenors offered at yesterday’s auction printed at 2.50% for 91 days, 3.84% for 182 days and 6.44% for the 364 days. The exchange rate between the naira and the US dollar closed at N419.17/$1 at NAFEX compared to previous session’s level of N419.94/$1, an appreciation of circa 0.18%.