Sudden Ukrainian Cease-Fire Pushes European and U.S. Stocks Higher

A sudden cease-fire in the Ukrainian conflict has caused European and U.S. stocks to rally in early morning trading as fears of geopolitical instability ease.

Russian President Vladimir Putin met with Ukraine President Petro Poroshenko to agree on a cease-fire that may become permanent. Russian spokesman Dmitry Peskov said that a “cease-fire regime” had been agreed upon after a conversation between the two. Peskov also said a mutual understanding between Ukrainian and Russian sides had been reached about the future of the Crimean region.

A sudden cease-fire in the Ukrainian conflict has caused European and U.S. stocks to rally in early morning trading as fears of geopolitical instability ease.

Russian President Vladimir Putin met with Ukraine President Petro Poroshenko to agree on a cease-fire that may become permanent. Russian spokesman Dmitry Peskov said that a “cease-fire regime” had been agreed upon after a conversation between the two. Peskov also said a mutual understanding between Ukrainian and Russian sides had been reached about the future of the Crimean region.

“President of Ukraine Petro Poroshenko had a telephone conversation with Russian President Vladimir Putin,” President Poroshenko said in a statement. “The result of the conversation was an agreement on a permanent cease-fire in the Donbass. There was a mutual understanding on steps that promote peace.”

Russian stocks have rallied over 5% on the news, but remain slightly below their highest level for the year in early January. Stock indices across Europe and the U.S. also rallied in early morning trading.

Continued Tensions

Despite an announced cease-fire, Ukraine’s Prime Minister Arseny Yatseniuk has dismissed the proposal, saying that Putin is attempting to deceive the west before a NATO summit where new sanctions against Russia would be designed. “The real plan of Putin is to destroy Ukraine and to restore the Soviet Union,” Yatseniuk said in a statement. 

Meanwhile, Barack Obama’s response to the news has been measured. Obama has said that NATO still needs to send an “unmistakable message of support” to Ukraine at the alliance’s upcoming summit. Additionally, the European Union is reportedly continuing to work on economic sanctions against Russia in spite of the announced cease-fire.

Speaking from Estonia, President Obama also said that Russia needs to cease supporting rebels before a political agreement can be made. “No realistic political settlement can be achieved if effectively Russia says we are going to continue to send tanks and troops and arms and advisors under the guise of separatists, who are not home grown, and the only possible settlement is if Ukraine cedes its territory or its sovereignty,” said Obama. The U.S. President added that he remained skeptical of the significance of the cease-fire. “Let’s see if there’s follow-up,” he told reporters. 

While most EU politicians have not yet addressed the cease-fire announcement, many analysts expect Europe to continue pressing for sanctions against Russia, including its right to host the 2018 world cup.

Earlier this week, Ukrainian separatists claimed they would recapture Donetsk airport, which they had previously been occupying. The private airport is over 500 km north of the Crimean peninsula in the eastern town of Donetsk.

Equity Reversal

After an early rally on the news, U.S. stocks steadily reversed course to trade flat for the day by 11:34a.m. Meanwhile, European stocks have maintained their strength throughout morning trading. Leading other European markets, the German DAX was up 1.3% in afternoon trading, while the French CAC 40 was up 1.1%. 

Recently, an economic slowdown in Germany was attributed to tensions with Russia, a significant trading partner with many export-focused German businesses.