U.S. market rise on good retail and energy sector statistics

Positive sentiments were observed yesterday on the markets, Wall Street added more than 1 percent. Optimism was caused by the statements of the Head of the Cleveland’s Fed Loretta Mester about the possible need for a more moderate pace of monetary tightening, including at the upcoming December meeting.

The Dow Jones added 397.82 points, or 1.18%, to 34,098.1, the S&P 500 gained 53.64 points, or 1.36%, to 4,003.58 level, while the Nasdaq Composite rose at 149.90 points, or 1.36%, to 11,174.41. On the bonds market benchmark US 10Y yield fell 1.86% to 3.7559 and returned at the beginning of November levels. DXY index which tracks the greenback against a basket of six other main currencies, traded 0.57% lower at 107.222, after adding around 1% so far this week. On oil market US Ministry of Finance clarifications regarding sanctions on Russian oil will be on focus. Price ceiling for oil from Russia may be determined later today and probably will have 2 options: $60 or $70 per barrel.

European Union officials are set to meet this Wednesday to approve a cap on Russia’s oil exports. The block has softened its latest sanctions proposal for the cap by delaying its full implementation and moderating key shipping provisions. The officials will also discuss the price level at the meeting. If they approve, the EU and the Group of Seven could announce the cap as early as this evening. In the meantime, after forcing Russian troops from Kherson two weeks ago, Ukrainian forces are now battling Russian military on the islands to the southwest. Russian stocks have fluctuated this morning after rising most in more than a week over a previous session, as oil steadied with traders waiting for details of a plan to cap Russian crude prices, while Gazprom threatened to cut gas transits via Ukraine. Both IMOEX and RTSI are currently up by 0.6% to 2,209 and 0.63% to 1,150 respectively. Gaz companies Novatek and Gazprom, as well as Sberbank have been among the losers this morning, while metal miners Polyus and Polymetal along with steel company Severstal gained the most. Russian rouble was mostly flat at the open with USDRUB down 0.14% to 60.53 and EURRUB flat at 62.32. Russian bond yields were steady with a 10-year benchmark rouble bonds up 1bps at 10.09%. Russian Finance Ministry will hold three OFZ auctions after record sale last week. Data wise, Russian Industrial production numbers will be published today with -3.9% expected year-on-year.

EU markets open higher on Wednesday ahead of strong PMI data. The DAX futures contract in Germany traded 0.1% higher at 14,430 level, the FTSE 100 futures contract in the U.K. added 0.56% to 7,494 points, while CAC 40 futures in France traded 0.15% higher at 6,661. Meanwhile, the ECB increased its balance sheet by €4 billion last week to €8.769 trillion, up from +€3 a week earlier. From peak values €8.836 trillion, the balance sheet decreased by only €67 billion. According to Christine Lagarde a further rate hike is appropriate. The European Central Bank will release its own meeting minutes on Thursday.

The firm run for SSA continues amid a rally in rates and dollar weakening. Bonds traded firmer yesterday with oilers leading the way as Brent surged from $82 levels on Monday to Tuesday’s $88.36/bbl close. NGERIA (+2.625) led the rally with ANGOL (+2.125) also in close pursuit; GHANA closed flat however. KENINT (+.625) also recovered with demand skewed towards short end unlike was the case on other names which saw duration bid.

The bonds secondary market closed on a negative note as average yields closed higher by 3bps across the curve. Average yields on the short & medium tier rose by 18bps and 1 bps however, the long end of the curve remained unchanged. The Mar 2035s bond was the worst performer.

The NTB secondary market closed on a flat note. Average yields remained unchanged across the short and Milesian tier of the curve. The long end dropped marginally by 1bps. Sept 2023 & Oct 2023 were the best performers as they dropped by 1bps each.

In the OMO secondary market, yields also dropped by 1bps across the curve with some buying interest witnessed.

**The MPC voted to hike MPR by 100bps to 16.50% to control rising inflation. The asymmetric corridor was maintained as well as other parameters.