U.S. equities rise marginally amid FEDs determination to continue to hike interest rates

U.S. stocks closed slightly higher on Thursday as Investors assessed the latest update on the Fed Reserve’s possible tightening of monetary policy. Minutes from the FOMC shows the Fed hiked its interest-rate target by 75 basis points for the second month in a row, reinforced the notion that the world’s largest central bank isn’t about to stop hiking interest rates any time soon. Subsequently, S&P 500 increased 0.2% to finish at $4,283.74, Nasdaq 100 increased 0.2% to finish at 12,965.34 while Dow Jones increased 0.1% to finish at $33,999.04. The 10-year yield Treasury declined 2 basis points to 2.879%. Gold spot price declined $0.40 to $1,776.30 per ounce while WTI crude futures for September gained $2.39 to $90.50 per barrel.

Turkish President Erdogan said talks in Lviv, western Ukraine, with United Nations Secretary General Guterres and Ukraine President Zelenskiy focused on how to “ultimately end” the nearly six months old conflict. Erdogan said he would evaluate the meeting with Russian President Putin. Meanwhile, European intelligence officials said Russia is likely to be using the Zaporizhzhia nuclear power plant in southern Ukraine to shield its troops and equipment, undermining the safety of the plant’s operations. Russian stocks traded lower this morning with benchmark IMOEX losing 0.56% to 2,182, as oil prices headed for a weekly drop. Energy giants Gazprom, Lukoil, Novatek were among the biggest losers together with metals producers Polymetal and Norilsk Nickel and Sberbank. The shares of a fertilizer producer Phosagro rose as much as 7.4%, the highest levels since the end of March, after the company approved its dividend and posted strong results. Russian ruble posted the biggest gains since the beginning of the month, as the tax period got closer, and broke 60 figure mark both against US Dollar and Euro.  USDRUB is currently trading at 59.55 and EURORUB at 59.89. 10-year benchmark ruble bonds yields were down 1 bps to 8.32%. Russian inflation fell 0.13% for the period 9-15 August to an annualized rate of 14.9%. Inflation remains high in Russia but is being driven lower by a steep decline in food prices. This has led some economists to worry that Russia could fall into a deflationary spiral. A 50 bps interest rates cut in September is still widely expected.

Bunds open weaker following trend from yesterday. The 10Y touched a high of 1.19% before dropping to 1.18%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.26% before retreating to 3.25%, 1 basis point firmer intraday. Stocks declined as markets worry about the degree to which central banks’ would hike rates in subsequent months to combat rising inflation. Consequently, the Stoxx 600, opened lower at 439.92 compared to previous session’s closing of 440.76.

We go into the close of the week literally starting off from where we stopped as the space continues to weaken with more risk pulling back despite the late surge into closing. The likes of NGERIA (-.25) and ANGOL (-.50) which were the major losers yesterday saw their curve remaining two way despite the pull back. KENINT (flat) did see a few buyers of risk with demand in the long end.

Bearish sentiments in the Nigerian local Secondary Market for Bonds persisted. We saw stable rates across the short to mid end of the curve while the long end had improved offers. Intraday, average yields were up 3 basis points across board.  Consequently, FGN 25s closed flat at an offer rate of 12.65% while 50s closed at an offer rate of 13.65%, 20 bps up from previous level of 13.45%. Activity in the Secondary Market for Treasury bills picked up slightly amid an OMO auction conducted by the CBN earlier in the day that had an offer of N50bn but no sale. Most of the activity hovered around OMO and SPEB maturities.  Consequently, discount rates on 29th of August 2022 SPEB & 28th of November 2022 SPEB were at 12.75%(previous:12.80%) and 12.55%(previous:12.35%) respectively. Finally, the exchange rate between the naira and the US dollar closed at N427.88/$1 at NAFEX compared to previous session’s level of N426.70/$1, a depreciation of circa 0.28%.