Trump-Putin Talks Spark Rally in Ukraine, Russia-Linked Assets

Markets React to Potential Trump-Putin Talks on Ukraine

Traders piled into assets potentially benefiting from a possible peace deal in Ukraine after the Kremlin signaled that Russian President Vladimir Putin and U.S. President Donald Trump would hold talks in the coming days.

Ukrainian Assets Lead the Charge

Ukraine’s dollar bonds were the best performers in emerging and frontier markets tracked by Bloomberg. The euro rebounded, and Poland’s zloty rose as much as 0.6% against the dollar.

Russian and European Stocks in the Spotlight

In stock markets, a Warsaw-listed Ukrainian equity index posted its biggest gain since May. UC Rusal, one of the few Russian companies still listed on major global exchanges, saw its Hong Kong-listed shares surge on higher-than-average volume. Raiffeisen Bank International AG, an Austrian lender with a Moscow subsidiary, climbed more than 10%.

Caution Urged Against Over-Optimism

Roger Mark, a fixed-income analyst at Ninety One UK Ltd. in London, described news of a “Trump-Putin meeting” as “positive,” but cautioned that progress was needed for Ukraine bonds to see sustained gains. “The focus will shift to what’s discussed at the meeting,” he said.

A History of Dashed Hopes

These moves recall an earlier rally this year when markets still bet that Trump would deliver on campaign pledges to bring peace to Ukraine early in his presidency. But that rally fizzled as his efforts to persuade Putin to end the conflict faltered.

Tougher Rhetoric and Sanction Threats

Trump has since taken a tougher line toward his Russian counterpart, threatening to impose heavy economic penalties on Moscow if Putin doesn’t comply with an Aug. 8 deadline to reach a ceasefire agreement with Ukraine.

Prices Still Below Previous Highs

Many of the related assets are currently trading far below February levels, when optimism over a peace deal and potential U.S. sanctions relief for Russia briefly boosted prices.

Skepticism About Current Attempt's Success

Kieran Curtis, a portfolio manager at Aberdeen Group Plc in London, expressed doubt about the latest attempt to end the conflict succeeding. “I would be more cautious than the market seems to be,” Curtis said. “There hasn’t been much effort on the Russian side in recent months to find a solution that could be acceptable to all parties, and I don’t see that one meeting is going to solve the problem.”

Moscow Exchange and Ruble Rise

Within Russia, the Moscow Exchange rose 5%, and the ruble strengthened 0.5% against the dollar, making it one of the world’s best-performing currencies.

European Defense Stocks Fall

Meanwhile, a Goldman Sachs-compiled basket of European defense stocks fell as much as 5.2%, to its lowest level since May. UBS’s Ukraine reconstruction basket and Hungary’s OTP Bank, which still has operations in Russia, climbed to record highs.

Further Analysis

It's important to note that these market movements are driven by speculation and hope, not necessarily concrete reality. Things can change quickly, and it's essential to exercise caution and assess the risks before making any investment decisions. Consulting with a qualified financial advisor is recommended to fully evaluate the situation.