Wall Street closes higher after Fed minutes confirm inflation focus

US equities finished slightly higher paring the losses of the early start of 2023. Dow Jones increased 0.4% to 33,270, S&P 500 advanced 0.8% to 3,853 and the Nasdaq was up 0.7% to 10,459. Treasury yields continued to drop with 2-year note losing 3 bps to 4.24% and the 10-year note losing 10 bps to 3.69%. US Dollar edged higher gaining support from generally hawkish tone of the Fed’s meeting. Dollar Index rose 0.1% to 104.095. The minutes of the Fed, released on Wednesday indicated agreement that the central bank should slow the pace of aggressive interest increases, but still keen to emphasize their focus on combating inflation. The December jobs report is due on Friday and is expected to show the economy added 200k jobs, which is lower than the prior month. Initial jobless claims are due on Thursday, and they will be studied for clues on the current strength of labor market.

France said it would provide Ukraine with “light combat tanks” and US President Biden confirmed the US may send Bradley Fighting Vehicles, moves that would meet Ukraine’s request for more armoured weapons. Meanwhile, Russian forces continued their assault on the eastern city of Bakhmut, shelling more than 60 settlements in the area with another 45 settlements coming under attack in the Zaporizhzhia and Kherson regions in the south. Russian stock market fluctuated this Thursday as oil and natural gas continued to trade lower. IMOEX was down 0.36% to 2,161, while RTSI was flat at 950. Airline Aeroflot, internet company Yandex and oil company Rosneft were among the best performers this morning, while Novolipetsk Steel and metals producer Norilsk Nickel retreated. Russian rouble strengthened against the US Dollar and Euro for the first time in three days. USDRUB was down 0.42% to 71.58 and EURRUB was down 0.23% to 75.92. Russian bond yields were mostly flat with 10-year benchmark bond yields trading at 10.27%. In other news, Russian wheat exports are expected to double to 21.3 million in the first half of 2023 on high global prices, a weak currency and the country’s largest stockpiles ever.

European stocks are trading in a mixed fashion this Thursday, as investors are digesting the disappointing German trade data as well as the hawkish tone from the minutes of the last Federal Reserve meeting ahead of the release of key Eurozone inflation data. The DAX futures contract traded 0.3% lower, CAC 40 futures traded down 0.5%, while the FTSE 100 futures contract climbed 0.1%. The main European stock indices have started the new year positively, as the release of better-than-expected inflation data from Germany and France raised hopes that the worst of the cost-of-living crisis in Europe is over. The November Eurozone PPI release is due later in the session and should provide more clues as to where inflation is headed in Europe. Gold futures fell 0.4% to $1,851.95/oz, while EUR/USD traded 0.2% higher at 1.0621.

The NTB secondary market closed on a positive note with average yields dropping by 135bps across the curve. The average yields on the short end remained unchanged while on the medium & long tenors average yields dropped by 145bps & 265bps respectively. In the OMO secondary market, average yields closed flat across the curve with the short, medium & long ends remaining unchanged. The FGN bonds secondary market closed on a positive note with average yields across the curve dropping by 10bps. Average yields on the short & long tenors dropped by 45bps & 2bps respectively while the medium end remained unchanged. The Mar 2024 bond was the best performer.