US stocks tumble ahead of friday’s inflation report

US stocks tumbled late Thursday to close sharply lower, as investors await a key read on May consumer price index report due today. Subsequently S&P 500 declined 2.4% to 4,018, Nasdaq 100 declined 2.8% to 11,754, while Dow Jones declined 1.9% to 32,273. The 10-year yield Treasury rose 1 basis point to 3.041%, while Gold fell 0.3 to $1,847.3. Meanwhile WTI crude oil moved $0.60 lower to $121.51 per barrel on worries about demand from China as Shanghai gets ready to lockdown 7 districts in the next 24 hours to conduct covid tests.

In an effort to take control of the remaining Ukrainian positions in the east of the country, Russian forces have continued fighting to capture the Ukrainian city of Sievierodonetsk and have launched an offensive on Slovyansk. In the meantime, Ukraine has asked IMF for a new loan program to help the war-ravaged country, as its economy shrank more than 15% from a year earlier in the first quarter of 2022. Russian equities extended its weekly losses, as the prices of European gas have retreated, and investors are waiting to see Russia’s Central Bank’s decision on key interest rates. IMOEX lost 0.3% to 2,287 with gold producer Polyus and natural-gas company Novatek showing the worst performance.  A metals producer, Norilsk Nikel has also lost significant value as it went ex-dividend on Friday. Russian Central Bank is widely expected to cut interest rates today for the fourth time. As inflation slows down and Russian rouble continues to appreciate, most analysts expect a 100 basis points cut to 10%. The decision will be announced at 1.30 Moscow time. Russian rouble has continued strengthening both against USD and EUR with USDRUB & EURRUB now at 58 and 61.35 respectively. Euroclear Bank SA has taken immediate measures to implement an asset freeze on Russia’s NSD after it was included in the latest round of EU sanctions list. Despite the additional sanctions, Russian sovereign bonds have remained stable with Russia 28 trading in mid 30s and Russia 47 in low 20s.

Bunds was little changed. The 10Y touched a high of 1.45% before dropping to 1.43%, 2bps down day-on-day. However, Peripherals open weaker;10Y BTPs yields went as high as 3.61% before retreating to 3.60%, 1 basis point firmer intraday. Stocks open lower as investors gear up for US inflation data for signals on the extent to which the US federal reserve will hike interest rates. Consequently, the Stoxx 600, opened lower at 429.05 compared to previous session’s closing of 434.38. Centre of attention today will be on US CPI report.

SSA opens weaker as risk sentiment remains depressed. €-denominated IVYCST and SENEGL shedding at least 2.50pts on Thursday as the ECB set course for ending bond purchases as well as exiting negative rates; both down 0.125pts at the open. KENINT continued to take heavy losses for $-bonds closing 1.875pts down; the bonds lead the slide at the open (-0.50pts) amid reports that the Treasury will work to secure commercial loans as Eurobonds became expensive.

Activity in the Nigerian local Secondary Market for Bonds was moderate amid a dampened Money Market liquidity. Demand for short to mid tenored securities eased except for FGN 29s while the long-dated maturities had improved offers with minimal trades done. Intraday, average yields were up by 1pb across the curve. Consequently, FGN 29s closed at an offer rate of 10.72%, down 8pbs from previous session’s level of 10.80% while 50s closed at an offer rate of 13.10%. Activity in the Secondary Market for Treasury bills was modest amid a tight system liquidity. We saw a mixed performance across board with focus on the new 1-year Bill. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rates on 11th of August 2022 NTB and 8th of June 2023 NTB (new 1 year) were at 3.40% (previous:3.55%) and 6.10% (previous:6.44%) respectively. The exchange rate between the naira and the US dollar closed at N419.30/$1 at NAFEX compared to previous session’s level of N419.17/$1, a depreciation of circa 0.03%.