US stocks closed higher Friday, shaking off earlier weakness that came after a disappointing gauge of manufacturing activity underlined fears that aggressive monetary policy tightening by the Fed Reserve could lead to a sharp slowdown. Meanwhile US equity futures fell ahead of US Independence Day holiday today. Subsequently Dow Jones increased 1% to finish at 31,097.26, the S&P 500 increased to 1.1% to finish at 3,825.33 while Nasdaq 100 increased 0.9% to finish at 11,127.85. The 10-year yield Treasury fell 7 basis points to 2.901%. Gold futures fell 0.3% to $1,801.50 per ounce while WTI crude oil increased 2.5% to $108.43 per barrel. Later this week, Fed Governor Christopher Waller & St. Louis Fed President James Bullard are scheduled to speak on Thursday. Also, FOMC minutes and US PMI report are due Wednesday while US employment report for June comes out on Friday.
Ukrainian troops have withdrawn from the last urban holdout in the Luhansk region, where Russia focused its latest offensive efforts, leaving the eastern Ukrainian city of Lysychansk. Meanwhile, Ukraine will present a blueprint today for how it will rebuild following Russia’s invasion that devasted economy. Meanwhile, Commission President Ursula von der Leyen will unveil a platform to coordinate more than 500 billion euros of EU donations to the embattled country. Russian equity markets rose this Monday morning driven by elevated oil and gas prices. IMOEX currently trades around 2200 mark. Energy giants Lukoil, Sberbank and metals producer Norilsk Nikel were among the best performers. By contrast, the fertilizer producer PhosAgro slumped as much as 7.7% after shareholders did not approve dividend payments. Driven by the expectations that Russian authorities could resort to foreign currency interventions, Russian ruble plunged more than 6% against the Dollar on Friday to its weakest level in 10 days and the likelihood of the ruble strengthening past 50 to the Dollar has eased. Both USDRUB and EURRUB are up today again and trade around 55 and 57 respectively. Japan’s Government Pension Fund, which is the world’s biggest, reported substantially reduced holding of Russian stocks and bonds. Its holding of Russian sovereign bonds dropped by 75% from the start of Russia’s invasion to Ukraine. Despite of the ongoing sanctions, pressures and selling by Western Bondholders, Russian sovereign bonds remain mostly unchanged with Russia 28 offered in mid-high 30s and Russia 47 offered in high 20s.
Bunds open weaker following trend from Friday. The 10Y touched a high of 1.29% before dropping to 1.28%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.11% before retreating to 3.10%, 1 basis point firmer intraday. Stocks open higher as dip buyers resurfaced even though worries over high inflation & dwindling economic growth continue affect appetite for risk assets. Consequently, the Stoxx 600, opened higher at 410.04 compared to previous session’s closing of 407.13. On the data front, PMIs for Euro area are due tomorrow while ECB account of its June Policy meeting comes up on Thursday.
A tilt towards firmness at the open for SSA following Friday’s bull run. GHANA (+0.25pts) continues firmer after rallying at least 6pts on Friday as the government announced intent to go to the IMF. ANGOL (+0.375pts) also continuing in strength as is most of the space.
Activity in the Nigerian local Secondary Market for Bonds was mostly calm amid a further plunge in system liquidity level. We witnessed mixed sentiments across the curve with some demand trickling in on the FGN 26s and 42s. Intraday, average yields were marginally down by 1bp across board. Consequently, FGN 26s closed at an offer rate of 10.16%, 1 basis point down from previous level of 10.17% while 50s closed flat at 12.97% on the offer. Activity in the Secondary Market for Treasury bills had mixed sentiments as Money Market liquidity weakened further. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rates on 25th of August 2022 NTB & 24th of November 2022 NTB were at 6.10% (previous: 6.00%) and 5.90%(previous:6.00%) respectively. Money Market liquidity may get a relief when expected inflow from FAAC hits the system. The exchange rate between the naira and the US dollar closed at N422.13/$1 at NAFEX compared to previous session’s level of N421.29/$1, a depreciation of circa 0.20%.