SYDNEY: US and European stock futures rallied on Thursday amid optimism over a potential peace deal between Ukraine and Russia. This offset concerns over rising Treasury yields, as higher inflation threatens to rule out any policy easing this year.
Trade war tensions persisted as US President Donald Trump announced plans to impose reciprocal tariffs on countries that levy duties on US imports. Meanwhile, gold prices rebounded toward their record high reached earlier in the week.
The euro extended its overnight gains, rising 0.5% in Asia to $1.0433. The increase was fueled by Trump’s phone calls with Russian President Vladimir Putin and Ukraine’s Volodymyr Zelenskiy, which raised hopes that the prolonged war could be nearing an end.
Oil prices fell for the second consecutive day, testing key support levels, while EUROSTOXX 50 futures climbed 1%, pointing to a higher open for European markets.
Nasdaq futures rose 0.4%, while S&P 500 futures gained 0.2%. Japan's Nikkei jumped 1.4%, benefiting from a weaker yen. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 1.2%, reaching its highest level since early December.
"There were pretty significant moves in the euro and European assets. The specter of war has definitely weighed heavily on the region," said Kyle Rodda, a senior analyst at Capital.com. "The optimism is probably somewhat premature." Chinese blue chips edged up 0.2%, while Hong Kong’s Hang Seng index extended its bullish run, rising 2.5% to a fresh four-month high.
Overnight, US data showed consumer prices rose at the fastest pace in nearly 18 months in January. The core inflation index, which excludes food and energy prices, increased by 0.4% for the month, surpassing the forecast of 0.3%.
With the Federal Reserve already signaling no urgency to cut rates, investors lowered their expectations for policy easing this year to just 28 basis points—equivalent to a single rate cut.
Treasury yields spiked on the inflation data, with 10-year yields rising 10 basis points overnight to a three-week high of 4.66%. However, they eased slightly on Thursday, falling 3 basis points to 4.6092%.
Barclays analysts still expect at least one rate cut from the Federal Reserve this year.
"Risks are now skewed toward the Fed delivering no cuts this year, and we are putting more weight on scenarios where rate hikes could even re-enter the conversation," they noted in a client report.
In currency markets, the US dollar fell 0.2% to 154.15 yen, after surging 1.3% overnight. The yen was the biggest loser amid higher US yields.
In commodities, oil prices extended their decline as optimism over a Ukraine-Russia peace deal grew, raising hopes for the removal of sanctions that have disrupted supply flows.
US crude dropped 1% to $70.64 per barrel, following a 2.7% loss overnight. Brent crude also fell 1% to $74.43 after declining 2.4% in the previous session.
Gold gained 0.5% to $2,918 per ounce, remaining close to its record high of $2,942.70 set on Tuesday.— Reuters
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