US equities advance on earnings and FED outlook

US stocks rallied higher on Thursday following the release of second-quarter GDP, which showed -0.9% QoQ. However, this was second consecutive quarter of negative U.S. economic growth after the -1.6% print in Q1 and therefore affirmed the U.S economy as now being in technical recession. Subsequently, Dow Jones increased 1.0% to finish at 32,529.63, S&P 500 increased 1.2% to finish at 4,072.43 while, Nasdaq 100 increased 1.1% to finish at 12,162.59. The 10-year yield Treasury fell to 2.680%. Gold price advanced $30.70 to $1,749.80 per ounce while WTI crude oil price declined 84 cents to $96.42 per barrel.

The exports of turbojets, air pumps and other machinery from Switzerland to Russia have surged in the last couple of months as manufacturers raced to fill any orders signed before the start of Russia’s invasion to Ukraine before sanctions will make them illegal. Overall, Russian imports have plunged since the US and its allies imposed sweeping sanctions over Ukraine’s invasion dropping 22% in the second quarter to $72.3 Billion, according to the Bank of Russia. In the meantime, missiles and rockets rained down on northern Ukraine on Thursday morning, making the first time in weeks that the Kyiv region has been hit. Russian equity market is set today for its biggest weekly gain since April as elevated prices of oil and natural gas helped to mitigate the international sanctions. IMOEX was up 0.56% this morning at 2,201 extending this week’s gain to 4.8% and erasing July losses. Gas company Novatek was among the best performers along with energy group Lukoil, Rosneft and Tatneft. Gold producer Polymental retreated 0.8% paring its weekly gain. It is still down 30% in July and 80% this year. Russian ruble resumed losses against the dollar after yesterday’s rebound due to increased demand for foreign currency in Russia and concerns over the start of government FX-purchases under the new budget rule. Both USDRUB and EURRUB were up around 0.5% this morning and traded at 61.23 and 62.35 respectively. Yields on local Russian government bonds dropped for the first time in four sessions with 10-year benchmark ruble bond yields losing 5 bps to 8.24%. The second largest producer of Aluminium, Rusal, which was sanctioned by the west, will offer another 2 billion Chinese yuan of bonds today due to a high demand.

Bunds open weaker following trend from yesterday. The 10Y touched a high of 0.889% before dropping to 0.886%, less than 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.158% before retreating to 3.157%, less than 1 basis point firmer intraday. Stocks advanced as investor sentiments improved due to cheery corporate earnings coupled with the hope that the fed will temper down on its rate hike campaign. Consequently, the Stoxx 600, opened higher at 435.71 compared to previous session’s closing of 432.77.

SSA opens firmer as bets on the Fed’s continuation of outsized hikes eased as the US is now in a technical recession following a 0.9% GDP contraction in Q2. NGERIA (+0.75) leading at the open following an outperformance yesterday. ANGOL (+0.625) and KENINT (+0.50) also on a firmer footing ahead of August elections in both countries.

Activity in the Nigerian local Secondary Market for Bonds was relatively calm amid a persistently feeble system liquidity. Mixed sentiments were witnessed across board. Intraday, yields were down by an average of 1 bp across board.  Consequently, FGN 26s closed at an offer rate of 11.60%, 20bps up from previous level of 11.40% while 45s closed flat.

Activity in the Secondary Market for Treasury bills was calm with few trades done as weakness in money market liquidity continued. We saw demand trickle in for SPEBS. Consequently, discount rates on 29th of August 2022 SPEB & 3rd of October 2023 SPEB were at 12.00% and 12.02% respectively. Finally, the exchange rate between the naira and the US dollar closed at N426.83/$1 at NAFEX compared to previous session’s level of N425.18/$1, a depreciation of circa 0.39%.