US equities rise, bonds decline as investors await jobs report to guage recession risk

US stocks finished higher on Thursday, putting them on pace for a string of weekly gains to kick off the month of July, as investors await Friday’s jobs report by the Fed Reserve. While awaiting Friday’s jobs report, investors heard from some Fed Reserve officials, including Fed Gov. Christopher Waller who said he backs a 75-basis point rate hike later this month, and another 50-basis points increase in September. Subsequently, Dow Jones increased 1.1% to finish at 31,384.55, S&P 500 increased 1.5% to finish at 3,902.62 while Nasdaq 100 rose 2.3% to finish at 11,621.35. The yield on 10-year Treasuries was at 3.007%. Gold price increased 0.2% to $1,739.70 per ounce while WTI crude oil increased 4.3% to $102.73 per barrel.

The effect of the Russian war is gradually starting to have an impact on the Russian economy. According to the Russian Ministry of Economy’s preliminary estimate, the country’s GDP shrank by 4% in May from a year earlier. The amount of retail trade in May was 10% lower than a year before. Consumer prices rose in April-May by 17-18% year on year. Russian stock market has traded lower this morning with IMOEX dropping 0.52% to 2215. With oil prices retreating and President Putin due to hold a government meeting on the energy sector the energy companies dropped the most with Rosneft losing as much as 3.6%. Lukoil and Tatneft also weighed on the Moscow benchmark. Russian ruble halted the longest series of losses since April and gained around 1% against both US Dollar and Euro. USDRUB is trading around 61.25 this Friday and EURRUB just below 62. As Ruble’s weaking was not accompanied by significant trade volumes, the weakening of demand led to declines in the exchange rates against the major currencies. The International Ratings Agency Fitch reduced the long-term Belarus rating from “CCC” to “C” after the Belarus Ministry of Finance announced it would make payments on its US Denominated bonds in Belarus rubles. Belarus sovereign bonds that already lost most of its value since the beginning of Russian invasion to Ukraine had a muted reaction and remained mostly unchanged with Belarus 23 offered in low 20s Belarus 30 offered in high teens.

Bunds open stronger retracing trend from yesterday. The 10Y touched a high of 1.30% before dropping to 1.28%, 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 3.15%, 3 basis points firmer intraday. Stocks open higher as investors get ready for earnings season coupled with US fed’s plan to combat rising prices to tame inflationary pressures. Consequently, the Stoxx 600, opened higher at 415.82 compared to previous session’s closing of 415.01.

A muted to firm open to SSA following a reversal in Brent upwards late Thursday while 10Y USTs topped 3% again. ZAMBIN underperformed with a 1.75pts slide yesterday as copper prices slumped to a 19-month low amid recession concerns. The curve opens firmer amid indications that China is preparing a $224 billion infrastructure package sent copper among other metals higher.

Activity in the Nigerian local Secondary Market for Bonds was tepid amid unrelenting weakness in system liquidity. We saw improved offers on FGN 26s and 42s while the rest of the curve was mostly steady. Consequently, FGN 26s closed at an offer rate of 10.50%, 22 basis points up from previous level of 10.28% while 50s closed at an offer rate of 13.13% from a previous level of 13.11%. Activity in the Secondary Market for Treasury bills continued with its bearish trend in tandem with declining Market liquidity. Selloffs by Banks were sustained across board. Day-on-day, average discount rates were higher across the curve. Consequently, discount rates on 8th of August 2022 SPEB & 29th of August 2022 SPEB were at 11.15% (previous: 10.95%) and 11.15%(previous:10.90%) respectively. Money market is expected to remain tight pending cash injections into the system. Finally, the exchange rate between the naira and the US dollar closed at N424.05/$1 at NAFEX compared to previous session’s level of N426.63/$1, an appreciation of circa 0.60%.