US equities mixed on robust july jobs report

US stocks closed mostly lower on Friday after a surprisingly strong jobs report. Investors believe this will make the Fed Reserve keep up its aggressive interest rate hikes to cool the economy and tame inflation.  The U.S economy added 528,000 jobs in July, far exceeding the 258,000 consensus estimate according to the Labour Department report on Friday. The unemployment rate ticked down to 3.5%, matching the lowest level since the late 1960s, while average hourly earnings climbed 15 cents to $32.27. Subsequently, Dow Jones increased 0.2% to finish at 32,803.47, S&P 500 declined 0.2% t0 finish at 4,145.19 while Nasdaq 100 declined 0.5% to finish at 12,657.55. The 10-year Treasury increased 16 basis point to 2.838%. Gold futures declined 0.9% to finish $1,791.20 per ounce while WTI crude oil future for September increased 0.5% to $89.01 per barrel. Meanwhile, Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari are due to speak on Wednesday. On the data front, US CPI data, US PPI, initial jobless claims, and US University of Michigan consumer sentiment are due Wednesday, Thursday, and Friday respectively.

As Russian forces made some incremental gains on the outskirts of Donetsk, the Ukrainian President Volodymyr Zelensky said in his late Sunday address, that negotiations with Moscow would not be an option if Russia proceeds with plans to hold referendums in occupied territories. In the meantime, Russian Security Council Deputy Chairman Dmitry Medvedev said in his interview with Russian news agency TASS, that “Russia is conducting a special military operation in Ukraine and seeks to establish peace on its own terms”, not on the terms of “former international partners, eager to see Russia’s military defeat”. Russian stock market rebounded from its lowest levels in two weeks as rising oil and natural gas prices mitigated the impact of international sanctions and the war in Ukraine.  Both IMOEX and RTSI were up almost 3% this Monday morning and traded at 2,110 and 1,103 respectively. Energy giants Lukoil and Gazprom were among the best performers, along with Sberbank and Internet company Yandex. Moscow Exchange postponed plans to allow investors form “friendly “nations to trade on Russia’s stock, bond, REPO, and derivatives market, as “additional work was needed to set up exchange systems”.  Ruble made small gains against both USD and EURO with USDRUB and EURUB trading at 60.33 and 61.35 respectively, as investors paused given unstable situation in China, as well as the government’s innovations and recommendations on currency controls. 10-year benchmark ruble bond yields lost 2 bps to 8.23%. Meanwhile, the Central Bank of Russia has introduced new restrictions in securities trading for non-residents to prevent negative effects of excessive speculation. From today, Russian custodians and registrars will not be able to conduct operations in securities coming from foreign custodies for the next 6 months. The securities bought by non-residents from “friendly countries” will also be quarantined. 

Bunds open stronger retracing Friday’s closing. The 10Y touched a high of 0.94% before dropping to 0.89%, 5bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open;10Y BTPs yields went as high as 2.87% before retreating to 2.83%,4 basis points firmer intraday. Stock prices rose as investors cast aside risks emanating from Fed’s rate hikes and shifted attention to resilient corporate earnings. Consequently, the Stoxx 600, opened higher at 437.65 compared to previous session’s closing of 435.72. Later this week, Euro-area industrial production report is due on Friday.

The space kicks off this week on a firm/strong start excluding the GHANA (-.275) curve which starts off weak as the curve simply reacts to the downgrade by S&P of its long-term local currency debt rating from B- to CCC+, with outlook also moved from stable to negative. One positive from the space is S&P’s affirmation of ANGOLA’s long-and short-term sovereign credit ratings to B-, with outlook remaining stable. Focus this week will be on the numbers from U.S inflation data (due Wednesday) as a strong jobs report on Friday has brought about speculation to the market about a likely hike of another 75bps in September. The SSA space is likely to react to these new developments as we await the likely numbers as initial market projections pointed to a 50bps hike.

Activity in the Nigerian local Secondary Market for Bonds was mixed. The short to mid end were mostly stable while the long end of the curve had improved offers except for the FGN 42s. Intraday, average yields were higher by 2bps across board.  Consequently, FGN 27s closed flat at an offer rate of 12.00% while 50s closed at an offer rate of 13.45%, 10 basis points up from previous level of 13.35%. Activity in the Secondary Market for Treasury bills was varied. Most of the activity hovered around OMO and SPEB maturities.  Consequently, discount rates on 21st of February 2023 OMO & 28th of November 2022 SPEB were at 10.20% and 12.10% respectively. Meanwhile, there will be an NTB auction next week. A total of N150.60bn will be on offer across the 3 tenors (91, 182 and 364 days). Finally, the exchange rate between the naira and the US dollar closed at N424.50/$1 at NAFEX compared to previous session’s level of N426.17/$1, an appreciation of circa 0.39%.