European stocks largely unchanged, dollar edges lower

US equities market finished mixed on Tuesday after a three-day holiday weekend. Dow Jones fell 1.1% to 33,911, the S&P lost 0.2% to 3,991, while the Nasdaq increased 0.1% to 11,095. Q4 earnings season continued to heat up with differing results from Dow members Goldmans Sachs and Morgan Stanley, while Travelers Companies warned of results missing the expectations. Treasury yields were mixed with 2-year note losing 1 bps to 4.21%, while the yield on the 10-year note gained 3 bps to 3.54% and 30-year note rate rose 4 bps to 3.65%. US Dollar edged lower with DXY losing 0.47% to 101.662. The economic calendar was light with Empire Manufacturing Index unexpectedly falling further into contraction territory. The Index dropped to -32.9 from -11.2 in December. Tomorrow’s economic releases are expected to be more exciting with December PPI and Retail Sales in focus. The PPI headline is forecasted to have fallen by 0.1%, while Retail Sales are expected to decline 0.8%.

Military actions continue in Donetsk, Herson and Zaporozhe areas. Recording to EC President Ursula von der Leyen, EU vows to introduce another, 10th package of Russia Sanctions. The new package will be mainly aimed at “closing loopholes, ending circumventions of sanctions, as well as rolling out massive consequences for those who circumvent EU sanctions”. Russia’s equity market on Tuesday showed decrease: IMOEX was down 1.26% to 2196.84 and RTSI traded 2.11% lower at 1002.85, followed by ruble weakened 1.27%. This drop continues today morning, with more than 0.5% decrease in both indices. Russian bond yields did not show dramatic changes, with RGBITR (gov bonds) and RUCBITR (corp bonds) indexes shown upward dynamic at 0.07% and 0.01%, correspondingly, with 10Y benchmark yield is 10.15%.

U.K. consumer price decreased from the highs of the 80s and amounted to 10.5% y/y in December vs. 10.7% y/y and 11.1% y/y two months earlier. Monthly dynamics: 0.4% mm vs 0.4% mm in November. But contrary to expectations the core CPI remained at the same level at 6.3% y/y (forecast 6.2% y/y). The situation with prices in the UK is still problematic, but the trend, like in some other leading world economies, is already turning down. On the stock markets the DAX index in Germany traded flat at 15,178 level, the FTSE 100 in the U.K. added 0.17% to 7,860 points this morning, while the CAC 40 in France rose 0.16% at 7,088 level.

The final release of December EU CPI is due later in the session, and as expected to be confirmed showing annual growth of 9.2%, a drop from 10.1% the prior month.

SSA firm at the open after trading lower since the week began. Bonds traded in the red on Tuesday albeit closed off session lows after a late retrace. NGERIA (-1.375) underperformed as President Buhari attempts to push through a plan to convert a CBN overdraft into bonds; long end was mostly sold during the session and in turn retraced the most after a late rally in rates. The curve leads gains at the open, gaining .875pts with demand skewed towards duration.

The NTB secondary market closed on a flat note with average yields remaining unchanged across the short, medium and long ends of the curve.

In the OMO secondary market, average yields closed on a positive with average yields dropping by 65bps.  Yields dropped by 95bps on the short end while the medium & long ends remained unchanged.

The FGN bonds secondary market closed on a negative note with average yields across the curve rising by 20bps. Average yields on the medium & long ends rose by 50bps & 10bps respectively while the short end declined by 15bps. The Mar 2024 bond was the best performer while the Mar 2037 bond was the worst performer.