U.S. stocks ended Tuesday’s session with explosive gains with all the three major stock benchmarks hitting their largest two-day percentage-point gains since April 2020. Market strategists pointed to several factors helping drove stocks higher, some believe stocks had certainly reached oversold conditions, “growing speculation that central banks could soon pivot towards a more dovish stance” was also helping to boost sentiment. Also, factory orders remained unchanged, the final reads on durable goods orders matched expectations, data on capital spending was upwardly adjusted, and the Job Opening and Labor Turnover Survey fell more than forecasted. Treasury yields are declining, and the U.S. dollar is falling. Crude oil prices are rising ahead of this week’s OPEC meeting, with reports suggesting production cuts may be in the offing.
Subsequently, Dow Jones moved 2.80 to finish at 30,316.32, S&P 500 advanced 3.06% to finish at 3,790.93 while Nasdaq 100 moved 3.34% to finished at 11,176.41. The 10-year Treasury rose 4bps to 3.67%. Gold spot price increased $25 to $1,727 per ounce and WTI crude oil added $2.89 to $86.52 per barrel.
European Union countries have reached a compromise on a new package of sanctions against Russia that includes a price cap on oil sales to third countries. A new package will also target a range of individuals and entities, including senior Russian ministry officials and people involved in organizing the recent referendums. It would also restrict access to aviation items, electronic components, and specific chemical substances to deprive Russia’s military from important technologies. The formal agreement is expected on be announced this Wednesday. In the meantime, Ukrainian President Zelenskiy said Ukrainian forces were making a “fast and powerful advance in the country’s south”, with “dozens of settlements” liberated from Russian control. Russian stock market retreated after three days of advances as the price of European natural gas declined and investors weighed the impact of expected fresh sanctions and Russian military setbacks on the battlefield in Ukraine. This morning IMOEX lost 2.2% to 2,001 and RTSI lost 2.44% to 1,073. Sberbank and energy giant Gazprom were among the biggest losers, along with a metal ‘producer Norilsk Nickel. Internet company Yandex gained slightly, rising for a seventh consecutive session. Russian ruble traded mostly flat this Wednesday gaining slightly against the US Dollar and losing around 1% against the Euro. USDRUB is currently down at 58.68 and EURRUB is up at 57.45. The volumes of Russian currency trading against the US Dollar and Euro have recently been declining with representatives of the central bank and Finance Ministry expecting the yuan to be more traded than Dollar and Euro. USDCNY is currently up 0.05% at 8.1823. Russian bond yields were mostly unchanged with 10-year benchmark bond yields trading 1.5 bps up to 9.815%. Russian Finance Ministry decided not to hold OFZ auctions this Wednesday due to a continuing volatility on the market.
European stocks extended positive streak for third session. The French CAC 40 index rose 4.24% to 6,039.69, FTSE 100 index gained 2.57% to 7,086.46 and the German Dax rose 3.78% to 12,670.48.
The 10-year U.K gilt yield increased 2.37 basis points to 3.866% while the German 10-year bund increased 0.021 basis points to 1.87%.
In U.K, less than a month into her tenure as U.K. prime minister, Liz Truss is seeing her political authority rapidly erode as her bold experiment in British Reaganomics spins out of her control. After presenting the biggest tax cuts in a generation to try to jolt the U.K. economy into higher growth, Ms. Truss is locked in a battle on three fronts as she tries to win over skeptical investors, the British people, and her own lawmakers.
Also in Europe, the EU has advanced work on a price cap for Russian oil under an approach that keeps the U.S. led effort on track but holds off on final approval. EU member states are set to agree on a two-stage approach to the international price cap on Russian oil, which is being developed within the Group of seven industrial economies. EU officials are preparing legislation needed to implement the measure but will hold off approving it until the rest of the G-7 is ready.
SSA opens in subdued fashion in the aftermath of yesterday’s rally. The space firmed on Tuesday with ANGOL (+3.375) and NGERIA (3.25) outperforming on the back of Brent’ resurgence to top $92/bbl. NGERIA (-.125) outright selling as the World Bank downgraded 2022 growth to 3.3% from a previous 3.8%. SENEGL (+2.25) was somewhat held back by some early selling on €-denominated issues.
The local FI market continued a quiet note generally.
The bonds market saw some activity with yields especially on the short and long end of the curve with yields rising by an average of 45bps across the curve.
There was some activity in the Treasury Bills market as yields dropped marginally on the long end of the curve as demand for September 2023 bills continued.