US equities decline as focus shifts to upcoming inflation report

US stocks finished lower on Tuesday as anxiety about looming inflation data and a selloff in semiconductor stocks drove the S&P 500 to its fourth straight losing session as markets await today’s CPI report. Subsequently, Dow Jones declined 0.2% to finish at 32,774.41, S&P 500 declined 0.4% to finish at 4,122.47 while Nasdaq 100 declined 1.2% to finish at 12,493.93. The 10-year yield Treasury climbed from 2.76% to 2.80%. Gold price increased by $6.80 to $1,812 per ounce while WTI crude oil was at $91.63 per barrel.

As Russian military operation enters its sixth month, Ukrainian President Volodymyr Zelenskiy has continued to pledge to “liberate” Crimea and said that “The Russian war against Ukraine and against all of free Europe began with Crimea and must end with Crimea”. A powerful explosion at a Russian base in Crimea, which killed one person, and was widely commented in press, was not caused by an incoming strike, Russia’s Defence Ministry said. Meanwhile, some defence analysts called this a hallmark of a Ukrainian attack. Russia’s equity market fluctuated this Wednesday morning as oil prices dropped and investors considered whether a major crude pipeline supplying Europe would resume operations anytime soon. Both IMOEX and RTSI were last seen slightly up, at 2,139 and 1,118 respectively. Russian rouble has also stayed mostly rangebound, as there was no news about the Bank of Russia interventions or the launch of the budget rule. USDRUB is currently 0.3% up at 60.45 and EURRUB is 0.1% down at 61.57. 10-year benchmark rouble bond yield was 2 bps lower at 8.25%. Russia’s distressed government Eurobonds posted the best returns in emerging markets with a group of 10 Russian dollar bonds, worth combined $32 billion, returning 76% from the start of July to August 3. The prices of these bonds have advanced considerably in the last month, but the debt is still deeply distressed and trades at 50-60 cents on the dollar.

Bunds open stronger retracing yesterday’s closing. The 10Y touched a high of 0.94% before dropping to 0.90%, 4bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open;10Y BTPs yields went as high as 2.89% before retreating to 2.84%, 5 basis points firmer intraday. Stock prices were steady as investors prepared for US inflation report which is expected to give some insight into the direction of Fed’s monetary policy. Consequently, the Stoxx 600, opened marginally lower at 435.82 compared to previous session’s closing of 435.98.

The space kicks off today with the likes of NGERIA (-.325) and ANGOL (-.625) leading the selloffs. News from Angola about the nation doubling its July oil revenue by more than double does not prevent the selloffs seen so far. Supply seemingly looks to have returned across the curve at the start as investors/markets prepare ahead of U.S inflation data which as stated yesterday would set the tone for market direction going into the month of September.

Activity in the Nigerian local Secondary Market for Bonds had bearish sentiments. The entire curve had improved offers except for the FGN 50s. Intraday, average yields were higher by 9bps across board.  Consequently, FGN 26s closed at an offer rate of 12.20% ,15 basis points up from previous level of 12.05% while 50s closed flat at 13.40%. Activity in the Secondary Market for Treasury bills was tepid. Most of the activity hovered around OMO and SPEB maturities.  Consequently, discount rates on 28th of November 2022 SPEB & 21st of February 2023 OMO were at 12.10% and 10.40% respectively.   Finally, the exchange rate between the naira and the US dollar closed at N426.67/$1 at NAFEX compared to previous session’s level of N425.50/$1, a depreciation of circa 0.20%.