Global stocks rallied on Wednesday as traders reacted to tentative signs that Russia and Ukraine may agree a peace plan, and awaited a US interest-rate decision later in the day.
Wall Street’s benchmark S&P 500 rose 1.3 per cent and the technology-focused Nasdaq Composite added 2.3 per cent, following strong equity market gains in Europe and Asia.
Ukrainian president Volodymyr Zelensky said talks with Russia were becoming “more realistic,” after another night of heavy shelling.
The two nations then made significant progress on a tentative peace plan including a ceasefire and Russian withdrawal if Kyiv declares neutrality.
Oil benchmark Brent crude, which approached $140 a barrel earlier this month, fell 1 per cent to $98.88.
Also supporting market sentiment was a statement from top Chinese official Liu He who said on Wednesday that Beijing would take measures to “boost the economy in the first quarter”.
Europe’s regional Stoxx 600 share index rose 3.1 per cent, Germany’s Xetra Dax added 3.8 per cent while London’s FTSE 100 rose 1.6 per cent.
Some investors view short-term equity market rallies as fragile, put at risk by the unpredictability of the Ukraine war as well as central banks tightening monetary policy to battle high inflation. The Stoxx remains more than 8 per cent lower for the year while the Dax has lost about 9 per cent.
“High volatility makes these markets difficult to trade,” said Jeremy Gatto, multi-asset fund manager at Unigestion.
“We could be in a situation later this afternoon where we get negative news on Ukraine-Russia or the Fed could be more hawkish [about future rate rises] than expected,” Gatto cautioned. “It’s best to stay neutral.”
At the conclusion of its monetary policy meeting later on Wednesday, the Federal Reserve is expected to respond to consumer price inflation hitting a 40-year high in February with a quarter-point rate rise. Before Russia invaded Ukraine last month, some traders had anticipated a 0.5 percentage point rise.
“I think the market is clearly discounting [0.25 percentage points],” said Caspar Rock, chief investment officer at Cazenove Capital.
“If they did anything differently, that would be a surprise” that could prove disruptive, he added. Investors would also focus on the so-called dot plot of Fed officials’ individual future interest rate projections and chair Jay Powell’s “commentary on the pace of further rate hikes”, Rock said.
Elsewhere, Hong Kong’s Hang Seng share index closed 9.1 per cent higher as markets across the Asia-Pacific region rallied. The CSI 300 index of mainland Chinese shares rose 4.3 per cent and the Nikkei 225 in Tokyo added 1.6 per cent.
China’s economy continues to be affected by the nation’s “zero-Covid” policy, which has led to widespread social restrictions and trade disruptions. Shanghai and Shenzhen, two key commerce hubs, are in partial lockdown while Chinese businesses are grappling with western sanctions against Russia pushing up prices of energy, metals and agricultural commodities.
The benchmark 10-year Treasury yield, which moves inversely to the price of the US debt security and underpins borrowing costs worldwide, was broadly steady at 2.17 per cent, close to its highest since May 2019.
The yield on Germany’s 10-year Bund, a barometer for borrowing costs in the euro area, rose 0.05 percentage points to 0.38 per cent, close to its highest level since November 2018.
The dollar index, which tends to fall when positive market sentiment reduces demand for the reserve currency, dropped 0.5 per cent.
