Stocks Rise, Euro Strengthens on US-Russia Talks: Markets Wrap

(Bloomberg) -- Asian equities rose as US-Russia talks spurred expectations for an end to the war in Ukraine. Risk sentiment was also stoked by the improving prospects for Chinese markets. 

A gauge of equities in the region climbed for a second day, led by shares in Japan and Hong Kong. European stock index futures gained over 1% and S&P 500 contracts also advanced. Global markets looked past the higher-than-expected US inflation figures — which eroded bets on rate cuts — with traders focusing on US President Donald Trump’s Ukraine peace talks with Russia. The euro rose versus most of its Group-of-10 peers, strengthening 0.5% against the dollar. 

The upswing in risk appetite came after the Asian regional stock gauge underperformed its global peers so far this year as Trump’s tariff threats, a stronger dollar and China’s lack of domestic policy stimulus weighed on the market. Chinese equities though have been lifted in recent weeks by an artificial intelligence breakthrough.

“The warmer tone in the risk environment across the region reflects some shrug-off of the higher-than-expected US inflation,” Jun Rong Yeap, market strategist at IG Asia Pte., wrote in a note. “More inflation data is needed to establish a trend and markets were already positioned for a prolonged Fed hold.”

Oil extended declines after the US-Russia talks, raising speculation that risks to Russian supply may ease. Shares of aluminum producer United Co Rusal International PJSC jumped as much as 29% in Hong Kong, the biggest gain in almost three years. Asian shipping stocks fell on concern freight rates may drop amid easing geopolitical tensions. 

Market sentiment got a boost from “the potential resolution of the Russia-Ukraine conflict, and the ongoing momentum in China’s tech sector,” said Charu Chanana, chief investment strategist for Saxo Markets Pte in Singapore. 

An index of dollar strength ticked lower as investors awaited clarity around possible reciprocal tariffs. Yields on 10-year US Treasuries edged down after jumping on Wednesday. The yen was little changed Thursday, after three consecutive days of declines.

Trump agreed in a phone call with Russian President Vladimir Putin to start negotiating an end to the war in Ukraine, sweeping aside three years of US policy and blindsiding European allies who feared the more conciliatory American stance amounted to a giveaway to the Russian leader.

In China, authorities are working on a proposal to help China Vanke Co. plug a funding gap of about 50 billion yuan ($6.9 billion) this year, according to people familiar with the matter, highlighting the government’s support for the distressed developer. 

Traders’ rush to buy Chinese technology stocks for their artificial intelligence potential has put the Hang Seng Tech Index on course for its highest close since the nation’s Covid-era reopening rally.

On Wednesday, Treasuries fell across the curve as investors adjusted expectations for Fed cuts following the inflation reading. The moves were mainly centered upon the higher-than-expected rise in US prices, which led traders to adjust bets on US rate cuts to now project the first and only reduction this year to come in December.

“The January CPI figures are often distorted due to annual costs such as insurance, which means the data may be sidelined for now, leaving Trump and his tariff announcements in the driving seat,” Chanana said.

Gold held a rally from its previous session, inching back toward its record high achieved earlier this week.

Key events this week:

• Eurozone industrial production, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone GDP, Friday
• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 1:52 p.m. Tokyo time
• Japan’s Topix rose 1.3%
• Australia’s S&P/ASX 200 was little changed
• Hong Kong’s Hang Seng rose 1.5%
• The Shanghai Composite fell 0.1%
• Euro Stoxx 50 futures rose 1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.5% to $1.0432
• The Japanese yen was little changed at 154.44 per dollar
• The offshore yuan rose 0.3% to 7.2879 per dollar

Cryptocurrencies

• Bitcoin fell 0.7% to $97,012.64
• Ether rose 1.5% to $2,724.57

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.61%
• Australia’s 10-year yield advanced two basis points to 4.48%

Commodities

• West Texas Intermediate crude fell 1.1% to $70.62 a barrel
• Spot gold rose 0.5% to $2,918.89 an ounce

This story was produced with the assistance of Bloomberg Automation.

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