U.S. and European stock futures surged on Thursday, buoyed by growing optimism that a peace agreement between Ukraine and Russia could be on the horizon. This optimism helped counterbalance the impact of rising Treasury yields, fueled by concerns over persistent inflation, which has dampened expectations for any U.S. policy easing this year.
Despite fears of a global trade war resurfacing, as U.S. President Donald Trump threatened reciprocal tariffs on nations imposing duties on U.S. imports, gold prices remained near record highs. The Japanese yen suffered the most in response to higher U.S. yields, while the euro gained strength, bolstered by positive developments in diplomatic talks between Trump, Russian President Vladimir Putin, and Ukrainian President Volodymyr Zelensky. This raised hopes that the long-running conflict could be nearing an end.
Oil prices experienced a decline, falling more than 2% overnight, and Wall Street closed the day mixed following a late rally.
In Asia, EUROSTOXX 50 futures rose 1%, while Nasdaq futures gained 0.4% and S&P 500 futures saw a 0.2% increase. Japan’s Nikkei index climbed 1.1%, and MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%. However, Capital.com’s senior analyst Kyle Rodda cautioned that the optimism surrounding a potential peace deal might be premature, particularly considering early U.S. peace proposals that could require significant concessions from Ukraine, including territorial compromises and NATO membership denials. These demands, combined with skepticism about Russia’s commitment to peace, have raised doubts about the durability of such a deal.
In Hong Kong, the Hang Seng index extended its bullish momentum, rising 1% to reach a four-month high, while Chinese blue chips remained flat.
U.S. consumer prices surged in January, marking their most significant increase in 1.5 years. The core inflation index, excluding food and energy prices, rose by 0.4%—higher than the expected 0.3% increase. As a result, investor expectations for additional rate cuts by the Federal Reserve have diminished, with only a single 28 basis-point cut now anticipated this year.
Treasury yields spiked following the inflation data, with 10-year yields reaching a three-week high of 4.66%, before retreating slightly to 4.6151% on Thursday.
Despite these shifts, Barclays analysts still predict one rate cut from the Fed this year but noted that the risks are now tilted towards no cuts, with the possibility of rate hikes entering the conversation.
In the foreign exchange market, the dollar strengthened against the yen, reaching 154.52, up 1.3% overnight as U.S. yields surged. Conversely, the euro recovered from earlier losses, rising 0.2% for the day to $1.0392.
In commodities, oil prices continued their overnight decline, spurred by hopes that a peace deal between Russia and Ukraine could lead to the lifting of sanctions and a stabilization of supply flows. U.S. crude dropped 0.7% to $70.88 a barrel, while Brent crude also fell by 0.7% to $74.66.
Gold prices remained flat at $2,902 per ounce, staying near their record high of $2,942.7 set earlier in the week.
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