U.S. stocks tumbled on Friday with Dow Jones hitting its lowest level of value since November 2020. Investors are worried that the prospect of a so-called soft landing for the U.S. economy is diminishing as the central bank keeps its aggressive pace of tightening monetary policy to fight high inflation. After announcing 75 basis point interest rate hike, Fed Reserve chair Jerome Powell warned again that its job is not yet done. Moreover, Treasury yields have surged since the Fed’s policy rate hike on Wednesday, putting pressure on the stock market. But it’s not just the Fed that’s spooking markets, a host of other global central banks have also hiked interest rates last week. U.S. equity traders are paying particularly close attention to the U.K., where markets have been roiled by the latest hike from the Bank of England by 50 basis point.
Subsequently, Dow Jones declined 1.62% to finish at 29,590.41, S&P 500 declined 1.72% to finish at 3,693.23 while Nasdaq 100 declined 1.80% to finish at 10,867.93. The 10-year yield Treasury fell 3.6 basis point to 3.681%. Gold spot price fell to $1,643.90 per ounce while WTI crude oil fell 1.4% to $77.70 per barrel.
President Putin’s order to add another 300,000 troops has triggered sporadic protests throughout Russia amid fears that the government will soon close the border for draft-aged men. The annexation of four occupied regions of Ukraine by Russian may happen as early as this week after votes to join Russia were completed. The votes organized by Russia were widely condemned and called by the United Nations illegal. In the meantime, Russia’s military attacked the southern Odesa region with drones overnight and hit Zaporizhzhia with missiles. The advanced air defense systems received by Ukraine from US appear to be “not even nearly enough” to protect Ukraine’s civilian infrastructure, Ukrainian President Zelenskiy commented. Russian equity market extended last week’s losses and tumbled to the lowest levels since the start of the invasion with IMOEX losing 4.44% to 1,997 and RTSI dropping by 5.25% to 1,082 this morning. Oil companies Gazprom, Lukoil, and Novatek led the slump as oil and European gas prices continued to decline. Internet company Yandex and metal producers Norilsk Nickel and Polyus were also among the biggest losers. Russian ruble finished stronger last week gaining 4.5% on Friday against the dollar and hitting 56.7, a level not seen August 25 as strict capital controls contributed to the Russian currency strength. Ruble remains mostly flat this morning with USDRUB down 0.18% to 58.10 and EURRUB down 0.08% to 56.22. The yield on the Russian 10-year OFZ surged above the 11% mark at the end of September hovering at the levels not seen since the start of April as the escalation of war by Russian government and lower revenues threatened Russia’s fiscal stability. Russia 10-year bond yields now trade at around 11.4%.
A weak open for SSA as risk sentiment amid rising core rates as 10Y USTs head towards 3.80%. GHANA (-.375) down after Friday’s early firming was undone by a Fitch downgrade to CC. the IMF team is also in the country for another round of negotiations on the $3 billion loan application. ANGOL (-.875) leading the slide at the open as Brent traded sub-85/bbl.