The first half of 2022 has been a historically bad stretch for markets as stocks and bonds have sold off in tandem. Investors who for years have relied on the 60-40 portfolio (holding 60% of stocks and 40% bonds) have struggled to find respite from the selling. The U.S markets were shut on Monday for the Independence Day celebration. However, the S&P 500 increased 1.1% on Friday to finish at 3,825.33, Nasdaq 100 increased 0.9% on Friday to finish at 11,127.85, while Dow Jones increased 1% on Friday to finish at 31,097.26. The 10-year yield on US Treasuries rose 7 basis points to 2.95%. Meanwhile, Brent crude dropped 0.3% to $113.16 per barrel, at the same time, Gold fell 0.6% to $1,806.37 per ounce.
Russia’s military is switching its focus further west into Donetsk with Luhansk largely under its control, fighting continues on the Bakhmut axis, which has emerged as a new flashpoint of the military action. In the meantime, Ukraine has indicated that it needs up to $65 billion this year to meet its funding requirements, billions more than its allies have so far been able to pledge. Russian equities rose for the second consecutive day as rising energy prices continued outweighing the impact of international sanctions. IMOEX was up 0.1% at 2206 with the world’s second largest aluminium company, Rusal leading the gains. Billionaire Vladimir Potanin, the biggest investor in Norilsk Nikel, said that he is ready to discuss merging the mining giant with Rusal, as sanctions against Russia weigh on both companies. Rusal’s shares jumped 22.3% following the news. The shares of Norilsk Nikel opened initially 4.69% higher, but then lost around 8%. Russian ruble has weakened against both US Dollar and Euro as investors continued following Russia’s government plans to start buying currencies of “friendly” countries. USDRUB was up 2.72% and is now trading close to 58, while EURRUB was up 1.82% and is now nearing the level of 60. Russian sovereign bonds continued trading mostly unchanged with Russia 28 offered mid 30s and Russia 47 in high 20s.
Bunds open marginally stronger retracing trend from yesterday. The 10Y touched a high of 1.35% before dropping to 1.33%, 2bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open;10Y BTPs yields went as high as 3.18% before retreating to 3.16%, 2 basis point firmer intraday. Stocks open higher as investors wait for the earnings season to gauge if the growth in corporate profit will hold out against rising inflationary pressures amid supply disruptions. Consequently, the Stoxx 600, opened higher at 410.86 compared to previous session’s closing of 409.31.
SSA opens flat to firmer as treasuries resume trading with yields tittering towards 3% from Friday’s 2.88% close. NGERIA (+0.25pts) opens firmer even as reserves continue to dwindle under the strain of fuel subsidies. GHANA (+0.125pts) also slightly firmer ahead of Wednesday’s meeting with the IMF over a bailout.
Activity in the Nigerian local Secondary Market for Bonds was mostly calm amid a sustained weakness in system liquidity level. We saw better offers around the short to mid end of the curve while the long end remained steady. Intraday, average yields were marginally up by 1bp across board. Consequently, FGN 26s closed at an offer rate of 10.18%, 2 basis points up from previous level of 10.16% while 50s closed flat at 12.96% on the offer. Activity in the Secondary Market for Treasury bills was bearish as Money Market liquidity remained frail. System liquidity remained tight although FAAC inflow came in on Friday. Day-on-day, average discount rates were up across the curve as Banks sold off securities to generate liquidity to fund their obligations. Consequently, discount rates on 3rd of October 2022 SPEB & 24th of November 2022 NTB were at 6.65% (previous: 6.00%) and 6.55%(previous:5.90%) respectively. Finally, the exchange rate between the naira and the US dollar closed at N421.50/$1 at NAFEX compared to previous session’s level of N422.13/$1, an appreciation of circa 0.15%.