US stocks advanced higher on Tuesday with the main benchmarks seeing their strongest advance in a month. However, Investors remain on edge, as persistent inflation has caused global central banks to move toward tighter monetary policies, sparking concerns of a possible recession. Subsequently, Dow Jones increased 2.4% to finish at 31,827.05, S&P 500 increased 2.8% to finish at 3,936.69 while Nasdaq 100 increased 3.5% to finish at 11,713.15. The 10- year yield Treasury advanced 5.8 basis points to 3.017%. Gold price decreased $1.40 to $1,708.80 per ounce while WTI crude oil price increased 1.6% to $101 per barrel.
The leaders of Iran, Russia and Turkey are set to hold talks in Tehran this Tuesday with Putin and Erdogan attempting to reach a deal on unblocking exports of millions of tons of Ukrainian grain from Black Sea ports. Meanwhile, Gazprom PJSC declared force majeure on several European natural-gas buyers, a move that may signal it intends to keep the gas supplies capped. The EU’s foreign policy chief, Josep Borrell, said that EU must be prepared to deal with a total cutoff of Russian gas. The European Union, which boosted military financing for Ukraine on Monday, has been preparing to approve some additional sanctions measures, including a ban on Russian gold. Russian stock market fell for a second day with IMOEX down 1.52% at 2, 064, as several companies began trading without dividend rights and gas supply risks persisted. Oil groups Surgutneftegas and Transneft, as well as Rostelecom all went ex-dividends. Detsky Mir gained 3.6% after children’s clothing retailer reported a 12% increase in gross merchandise value. Russia’s currency advanced both against the US Dollar and Euro, heading for its highest close in a week as exporters prepared for monthly tax payments. Ruble gained 0.88% against the Dollar to 55.47 and 0.56% against the Euro to 56.59. Some analysts predict that Russian currency may move even higher to 55/$ by the end of this week, as deadlines for taxes and dividend payments approach. 10-year benchmark ruble bonds yield for bonds trading inside Russia were little changed at 8.44%. A cut in the key interest rate by the Central Bank on Friday of only 50 bps is widely expected and would be neutral for OFZ market.
Bunds open slightly stronger retracing trend from yesterday. The 10Y touched a high of 1.29% before dropping to 1.27%, 2bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open;10Y BTPs yields went as high as 3.19% before retreating to 3.17%, 2 basis points firmer intraday. Stocks gained as investors monitored Q2 earnings reports and looked out for signals that Russia will resume gas supplies as scheduled. Consequently, the Stoxx 600, opened higher at 424.94 compared to previous session’s closing of 423.41.
SSA opens mostly firmer continuing Tuesday’s late surge. The space shook off early lethargy to close firmer as risk sentiment remained strong even in the face of rising treasury yields. GHANA shed 1.75pts in a standout underperformance as RM continued selling; the same struggling to shake off weakness, down 0.125pts. Elsewhere, ZAMBIN (+0.625pts) leading at the open amid reports that creditors may commit to the requisite debt relief this week unlocking board approval of the $1.4 billion programme.
Activity in the Nigerian local Secondary Market for Bonds was quiet as traders focused on the outcome of the MPC meeting. Eventually the meeting ended with the MPR being raised by 100bps to 14.00% while the other parameters were retained. Bearish sentiments were sustained with further improved offers seen across most of the curve following yesterday’s Bonds auction result. Intraday, yields were up by an average of 16 bps across board. Consequently, FGN 25s closed at an offer rate of 10.80%, 30bps up from previous level of 10.50% while 42s closed at an offer rate of 13.71%, 36bps up from previous level of 13.35%. Activity in the Secondary Market for Treasury bills was muted amid an improved but still feeble system liquidity level. We saw a sustained bearish bias from the short to long end of the curve with few trades done. Consequently, discount rates on 28th of November 2022 SPEB & 16th of May 2023 OMO were at 10.90% and 9.70% respectively. Market is expected to remain bearish in the short run until expected inflows from Bonds coupon payments hit the system. Finally, the exchange rate between the naira and the US dollar closed at N422.30/$1 at NAFEX compared to previous session’s level of N423.17/$1, an appreciation of circa 0.21%.