HONG KONG: Asian shares rebounded on Thursday after a strong rally on Wall Street, while European stocks sparked a stunning surge on bargain hunting following a slump in oil prices and a Ukraine-inspired rout.
The silver lining of peace talks has provided some much-needed support for asset markets, which have been in extreme volatility in the two weeks since Russia invaded its neighbor, sparking a wave of sanctions against Moscow.
However, commentators urged caution in times of uncertainty, with some warning stocks could fall further and crude oil will undoubtedly remain elevated for some time.
But for now, investors are enjoying a rare moment of calm, buying into cheaper stocks after a blockbuster day for their colleagues in the U.S. and Europe.
The Dow rose 2%, the S&P 500 rose even more, and the tech-heavy Nasdaq gained 3.6%.
Frankfurt surged nearly 8% and Paris surged more than 7%, with analysts also crediting gains to talk of plans to issue more joint debt to speed up green and renewables, defense and subsidies for soaring energy costs.
But a key driver of the gains was a sharp drop in oil prices, a relief to traders worried about already high inflation.
Brent crude fell as low as $105.60 after hitting a high of $139 two days earlier, on hopes that a glut of Russian oil removed from the market through sanctions could be largely replaced by purchases elsewhere.
The United Arab Emirates said on Wednesday it would urge the rest of the OPEC oil-producing cartel to boost output, while U.S. talks with big producer Venezuela appeared to be making progress.
Meanwhile, Iraq has said it can boost production and nuclear talks with Iran are showing signs of bearing fruit.
Both major contracts fell in Asian trade on Thursday, but commodities are expected to remain strong as the war in Ukraine rages and supplies remain tight.
Meanwhile, optimists got a boost after Ukrainian President Volodymyr Zelensky’s top foreign policy aide said the country was ready to talk about Moscow’s demands to remain neutral in exchange for security assurances.
“Of course, we are ready for a diplomatic solution,” Deputy Chief of Staff Ihor Zovkva told Bloomberg Television.
“Our first precondition for such negotiations is an immediate ceasefire and the withdrawal of Russian troops.”
Meanwhile, Russia’s foreign ministry said it would be better if its goals in Ukraine were achieved through negotiations.
Investors will be closely watching Thursday’s meeting of the two foreign ministers in Turkey, the first high-level contacts between Kyiv and Moscow since the invasion.
Nadia Lovell of UBS Global Wealth Management said: “If you see the Ukraine war resolved – and we’ve had some reports that Russia and Ukraine may be approaching a negotiating stage – that could help turn the tide. market sentiment.”
But she said she sees further volatility ahead.
In equity markets, Tokyo rose 3.8%, while Hong Kong, Seoul and Taipei all rose more than 2%. Shanghai, Sydney, Singapore, Manila and Wellington also rose sharply.
However, the market is still in the doldrums this year, with Stephen Innes of SPI Asset Management saying: “It’s been a painful week for investors; keep in mind this is a financial crisis type of market and everyone is trading the headlines. And chasing the same momentum intraday.
“But this should prove to be a reminder that systemic flows can move markets in both directions, especially when an active investor base is on the sidelines.”
