Wall Street fell ahead more tightening Fed’s tone

The recent positive on the Wall Street from the expected reduction of Fed’s rate hike has been levelled. A certain role in yesterday’s decline in markets was played by the numbers on the ISM index in the service sector (56.5 vs 54.4), indicating an increase in consumption, and this may once again contribute to the change in the Fed’s tone. The Dow Jones fell 1.4%, to close at 33,947.1, the S&P 500 lost 1.79% to 3,998.84 level, while the Nasdaq Composite dropped 221.56 points, or 1.93%, to finish on 11,239.94. Broadly, indexes suffered as data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.

Russian forces targeted the suburbs around the southern city of Zaporizhzhia with missiles overnight, damaging infrastructure and residential buildings. The Nikopol district in the central Dnipropetrovsk region was shelled, while Russian troops continued an offensive around Bakhmut and Avdiyivka in the east. In the meantime, US Secretary of Defense Austin said strengthening Ukraine’s air defenses is a top priority for Pentagon as emergency shutdowns were imposed across Ukraine to allow repairs to energy facilities hit by Russian missiles. Russian stocks declined Tuesday morning, giving back some of Monday’s gains, as investors monitored potential implications of a price cap on Russian oil imposed by the EU together with G7. IMOEX lost 0.91% to 2,189 and RTSI lost 1.68% to 1,096. Gaz producers Gazprom and Novatek were the biggest losers along with Sberbank and Norilsk Nickel. Russian rouble fell for a fourth day against US Dollar and the Euro, while extending retreat against the yuan into a seventh day. USDRUB was up 0.58% to 62.95 and EURRUB was up 0.13% to 66.13. Russian bond yields were higher with 10-year benchmark rouble bonds up 1.5 bps to 10.215%.  In latest developments, Gazprom will offer local bonds replacing 2029 Eurobonds currently traded in US Dollars. In other news, Russian may cut its crude production slightly amid the current volatility, Deputy Prime Minister Novak said. Russia’s December oil export sales are seen at the November level.

A weak open for EU markets following the late selling in rates on Monday. Bunds shed 6bps from the day’s lows to close 1.880% even as European PMIs did not stray far from expectations – the S&P Global Composite PMI for the euro area came at the expected 47.8. The Stoxx 600 was down 0.28% at 0830GMT after shedding 0.41% on Monday. German factory orders for October surprised to the upside with 0.8% monthly increase for what is the day’s major data release.

SSA opens weak as risk sentiment soured following a strong ISM Services figure for November which raised bets on a higher Fed terminal rate. ANGOL (+.375) and NGERIA (+.25) among the strong performers on Monday but both open .375pts down as Brent trades about 5% from Monday’s peak. GHANA (-.50) underperformed with early gains being reversed as the government announced restructuring plans for GHS debt; the slide continues at the open with bonds trading a point down.

The NTB secondary market closed on a positive note as average yields closed lower by 1bps across the curve. Average yields on the short & medium tier closed lower by 1bps while, the long end of the curve dropped by 2bps. There was continued buying interest at the long end of the curve.

In the OMO secondary market, average yields closed lower by 1bps across the curve.

The FGN bonds secondary market closed on a mildly positive note as average yields closed lower by 2bps across the curve. Average yields on the short end of the curve dropped by 15bps however, the medium & long end of the curve closed flat. The Mar 2024 bond was the best performer.

The DMO is offering a 2yr Savings Bond due in Dec 2024 and a 3yr bond due Dec 2025 at 12.255% & 13.255% respectively.