Global equities surge on Ukraine peace hopes, Euro extends gains
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Stocks Rally as Risk Sentiment Improves
Global markets are in rally mode, with European and U.S. futures posting solid gains following renewed optimism over a potential peace agreement between Ukraine and Russia. The EuroStoxx 50 is set to open 1% higher, while Nasdaq and S&P 500 futures are also pushing higher, despite the drag of rising Treasury yields. In Asia, Japan’s Nikkei surged 1.4%, benefiting from a weaker yen, while Chinese and Hong Kong stocks extended gains, with the Hang Seng Index climbing to a fresh four-month high. Investor sentiment remains buoyant, but analysts warn that optimism might be premature, as geopolitical uncertainties and macro risks persist.
Euro Strengthens as Geopolitical Risks Ease
The euro has extended its gains to $1.0433, lifted by reports of direct talks between U.S. President Donald Trump, Russian President Vladimir Putin, and Ukraine’s Volodymyr Zelenskiy. Hopes that the war may be nearing a resolution have injected fresh momentum into European assets, fueling the broad-based stock market rally. While traders welcome this potential de-escalation, they remain cautious, given that previous diplomatic efforts have failed to produce lasting results. The Euro’s strength is further complicated by shifting rate expectations, as higher U.S. inflation data has led to a reduced probability of Fed rate cuts this year, potentially limiting further dollar weakness.
Inflation Risks Challenge Fed’s Rate Path
Fresh U.S. inflation data revealed that consumer prices rose more than expected in January, with core inflation advancing 0.4% month-over-month, surpassing forecasts of 0.3%. The hotter-than-expected print has diminished expectations for aggressive Fed easing, with traders now pricing in only one rate cut for 2025. Treasury yields have responded sharply, with the 10-year yield jumping to a three-week high of 4.66%, before retreating slightly. Barclays analysts have now tilted their outlook toward no Fed cuts this year, even acknowledging the possibility that rate hikes could re-enter the conversation if inflation remains sticky.
Oil Extends Losses on Easing Geopolitical Tensions
Crude oil prices have taken another hit, with Brent and WTI both falling 1%, extending their overnight declines as peace hopes raise the prospect of sanctions being lifted on Russian energy exports. WTI crude is now trading at $70.64 per barrel, its lowest level in weeks, while Brent is holding at $74.43. A peace deal could further reshape the global energy supply outlook, potentially easing disruptions and capping oil prices, though long-term geopolitical risks remain. The pullback in crude coincides with a broader reassessment of demand expectations, as the Fed’s more hawkish stance could weigh on economic growth and industrial consumption.
Gold Holds Firm Despite Rate Uncertainty
Gold prices remain near record highs, rising to $2,918 per ounce, as investors continue to balance geopolitical optimism against inflation risks. While easing war concerns could reduce gold’s safe-haven appeal, the persistence of higher-than-expected inflation and central bank uncertainty has kept demand strong.
Market Outlook and Strategic Considerations
Equities are showing strong upside momentum, but geopolitical optimism must be confirmed by concrete developments before markets fully price in a peace resolution. Rising Treasury yields could act as a headwind, particularly for rate-sensitive sectors, as traders adjust expectations for prolonged Fed tightening. The Euro’s strength could be tested if inflation dynamics shift, while oil’s decline reflects improving supply sentiment, though volatility remains high. Gold’s resilience underscores lingering macro risks, making it a key asset to watch in the coming sessions.
Global markets are in rally mode, with European and U.S. futures posting solid gains following renewed optimism over a potential peace agreement between Ukraine and Russia. The EuroStoxx 50 is set to open 1% higher, while Nasdaq and S&P 500 futures are also pushing higher, despite the drag of rising Treasury yields. In Asia, Japan’s Nikkei surged 1.4%, benefiting from a weaker yen, while Chinese and Hong Kong stocks extended gains, with the Hang Seng Index climbing to a fresh four-month high. Investor sentiment remains buoyant, but analysts warn that optimism might be premature, as geopolitical uncertainties and macro risks persist.
Euro Strengthens as Geopolitical Risks Ease
The euro has extended its gains to $1.0433, lifted by reports of direct talks between U.S. President Donald Trump, Russian President Vladimir Putin, and Ukraine’s Volodymyr Zelenskiy. Hopes that the war may be nearing a resolution have injected fresh momentum into European assets, fueling the broad-based stock market rally. While traders welcome this potential de-escalation, they remain cautious, given that previous diplomatic efforts have failed to produce lasting results. The Euro’s strength is further complicated by shifting rate expectations, as higher U.S. inflation data has led to a reduced probability of Fed rate cuts this year, potentially limiting further dollar weakness.
Inflation Risks Challenge Fed’s Rate Path
Fresh U.S. inflation data revealed that consumer prices rose more than expected in January, with core inflation advancing 0.4% month-over-month, surpassing forecasts of 0.3%. The hotter-than-expected print has diminished expectations for aggressive Fed easing, with traders now pricing in only one rate cut for 2025. Treasury yields have responded sharply, with the 10-year yield jumping to a three-week high of 4.66%, before retreating slightly. Barclays analysts have now tilted their outlook toward no Fed cuts this year, even acknowledging the possibility that rate hikes could re-enter the conversation if inflation remains sticky.
Oil Extends Losses on Easing Geopolitical Tensions
Crude oil prices have taken another hit, with Brent and WTI both falling 1%, extending their overnight declines as peace hopes raise the prospect of sanctions being lifted on Russian energy exports. WTI crude is now trading at $70.64 per barrel, its lowest level in weeks, while Brent is holding at $74.43. A peace deal could further reshape the global energy supply outlook, potentially easing disruptions and capping oil prices, though long-term geopolitical risks remain. The pullback in crude coincides with a broader reassessment of demand expectations, as the Fed’s more hawkish stance could weigh on economic growth and industrial consumption.
Gold Holds Firm Despite Rate Uncertainty
Gold prices remain near record highs, rising to $2,918 per ounce, as investors continue to balance geopolitical optimism against inflation risks. While easing war concerns could reduce gold’s safe-haven appeal, the persistence of higher-than-expected inflation and central bank uncertainty has kept demand strong.
Market Outlook and Strategic Considerations
Equities are showing strong upside momentum, but geopolitical optimism must be confirmed by concrete developments before markets fully price in a peace resolution. Rising Treasury yields could act as a headwind, particularly for rate-sensitive sectors, as traders adjust expectations for prolonged Fed tightening. The Euro’s strength could be tested if inflation dynamics shift, while oil’s decline reflects improving supply sentiment, though volatility remains high. Gold’s resilience underscores lingering macro risks, making it a key asset to watch in the coming sessions.