U.S. stocks fell after data showed a cooling economy

US equities market finished lower on Wednesday, paring some of the gains seen year-to-date. Dow Jones tumbled 1.8% to 33,297, the S&P fell 1.6% to 3,929 and the Nasdaq declined 1.2% to 10,957. There was a lot of mixed data with retail sales falling more than expected, producer price index cooling off, industrial production dropping more than anticipated and homebuilder sentiment unexpectedly improving. Treasury rates were lower, as the yield on the 2-year note declined 11 bps to 4.09%, the yield on the 10-year note lost 15 bps to 3.38% and the 30-year bond rate decreased 10bps to 3.54%. The Dollar slipped with DXY losing 0.15% to 101.95. US data released on Wednesday showed retail sales fell by the most in a year in December and manufacturing output suffered its biggest drop in nearly two years, stocking fears that US economy is headed for a recession. This prompted a sharp drop in government bond yields, as investors bet the Fed would not be able to raise rates as sharp as previously expected. Focus today is on housing starts and building permits for December, as well as initial jobless claimers and the Philly Fed Manufacturing Activity Index.

Military actions continue in Donetsk and Lugansk areas. A helicopter carrying the team of Interior Ministry of Ukraine crashed near Kiev with 17 people killed, including Interior Minister Denis Monastyrsky. Ukraine did not directly blame Russia but called “deliberate actions to destroy helicopter” among several versions of the tragedy to be considered. Russia’s equity market on Wednesday recovered after morning decrease: IMOEX ended up almost flat (-0.03%) at 2196.26 and RTSI traded 0.35% higher at 1002.85, followed by ruble strengthened 0.36%. Today trading session started again with drop: more than 0.7% decrease in both indices. Russian bond yields did not show dramatic changes, with RGBITR (gov bonds) shown downward dynamic at 0.08%, with 10Y benchmark yield is 10.16%; while RUCBITR (corp bonds) index was up at 0.03%.

European market repeats the US trend, as overnight selloff due to weak economic data in the US also reflects on EU stock market shrimping. On the stock markets during yesterday’s session the DAX index in Germany traded flat at 15,181 level, the FTSE 100 in the U.K. fell 0.26% to 7,830 points, while the CAC 40 in France rose 0.09% at 7,083 level. But as for today’s opening, European stock market dropped following the global sentiment on the possibility of recession this year: DAX trades lower 0.9%, while FTSE 100 and CAC 40 are down 0.7% from previous closing prices.

10Y UK GILT and Deutsche Bundus yield slightly went down (3.288 vs 3.324 and 2.016 vs 2.087, correspondingly) as a measure of risk-off on the one hand, and waiting for today’s ECB President Christine Lagarde speech on the other, where investors will be looking for some clues on the future of interest rate, expecting less aggressive strategy from ECB.

Market opens largely weak in a somewhat risk-negative session as Brent trades 4% down from Wednesday’s session high. The space closed yet firmer with oilers again the pick of the bunch; a deeper contraction in retail sales pushed risk sentiment higher later in the day as bets on a smaller 25bps hike at the February FOMC increased. NGERIA (+1.875) was buoyed by remarks by the Finance Minister that the country wouldn’t tap Eurobond markets in 2023 and that debt servicing costs would be trimmed to 60% of revenue compared to 80% for the year up to November in 2022.

The NTB secondary market closed on a negative note with average yields rising by 10bps. Average yields across the short end rose by 25bps. However average yields across the medium and long ends of the curve remained unchanged. Jan 26, 2023 saw some selling pressure. In the OMO secondary market, average yields closed flat with average yields across the short, medium & longs ends remaining unchanged.

The FGN bonds secondary market closed on a negative note with average yields across the curve rising by 5bps. Average yields on the short & long ends rose by 1bps & 10bps respectively while the medium end remained unchanged. The Mar 2024 bond was the best performer while the Apr 2049 bond was the worst performer.