Strong U.S. data pushed market lower on fears of tightening Fed’s rhetoric

U.S. markets finished Wednesday session lower as focus on increased fears of a tougher policy of the Fed, which was facilitated by the statistics on retail sales. U.S. data, released Wednesday, showed October retail sales rose 1.3%, more than expected, suggesting that the U.S. economy was holding up despite soaring inflation, denting hopes for a pause in rate increases.

The Dow Jones fell 39.09 points, or 0.12%, to 33,553.83, the S&P 500 lost 32.94 points, or 0.83%, to 3,958.79 and the Nasdaq Composite dropped 174.75 points, or 1.54%, to 11,183.66. Restrained volatility was observed on the bond market and after the growth of yields at the beginning of the trading session benchmark UST 10Y fell by 2.11% to 3.6899 in the end.

DXY index, which tracks the greenback against a basket of six other currencies, edged lower to 106.030, still above the three-month low of 105.30 earlier in the week.

The White House said that it had not seen any evidence so far that it was not an errant Ukrainian air defense missile behind a strike on a village near Poland border. Still the US have emphasized that Russia was ultimately to blame. In the meantime, Russia pounded gas production facilities and a major factory in a new missile strikes on critical infrastructure in Ukraine on Thursday. Explosions were heard in several parts of the country, including Odesa, the capital Kyiv and the central city of Dnipro. Russian equity market rose slightly in early trading Thursday as investors monitored geopolitical concerns after a rocket struck a Polish village. IMOEX was up 0.04% to 2,228, while RTSI was lower 0.09% to 1,163. Internet company Yandex, energy giant Gazprom and Sberbank were the biggest winners, while Lukoil and Novatek were among the biggest drags. Russian rouble was mostly flat with USDRUB unchanged at 60.35 and EURRUB slightly lower at 62.56. Russian bond yields were lower with 10-year benchmark rouble bond yields dropping below 10% to 9.93%. In economic news, Russia’s economy shrank for a second quarter as the shock of sanctions disrupted trade and upended domestic demand, with the worst downturn likely early next year. GDP fell an annual 4% in the third quarter in line with expectations.

EU markets opened mixed on Thursday with strong results in Germany retail sector. The DAX futures contract in Germany traded 0.18% higher at 14,260 level, the FTSE 100 futures contract in the U.K. fell 0.58% to 7,310 points, while CAC 40 futures in France traded 0.53% lower at 6,572. The highlight of Thursday’s European data slate is the latest release of the CPI figure for the Eurozone for October, which is expected to be confirmed at an annual rise of 10.7%, up 1.5% on the month.

A mixed open for SSA following on from Wednesday’s largely weak showing. NGERIA (-1.50) the underperformer yesterday after some supply forced the bonds as much as 2pts down before paring; duration was most supplied and the weakness continues at the open. KENINT (+.375) demand continued as the short squeeze trade remained at play; bonds open 25c firmer.

The bonds secondary market saw some activity as average yields closed on a positive note, closing lower by 5bps. Average yields on the short & medium tier of the curve increased by 1bps while the long end dropped by 2bps. The Apr 2049s & Mar 2050s bonds were the best performers. The worst performer was the Jan 2026s bond. The NTB secondary market closed on a flat note. Average yields dropped by 1bps across the short end of the curve. Across the to medium and long tier of the curve, yields closed flat as there was no activity. In the OMO secondary market, yields closed flat across the curve.