World markets jumped on Wednesday as Ukraine President Petro Poroshenko said a ceasefire had been reached with Russia, raising hopes that a recent escalation in the conflict could be reversed.
The news sent Russian shares soaring towards their biggest daily gains in four months, while the rouble jumped 1.5% against the dollar, despite some differing reports of the extent of the truce talks from the Kremlin.
Poroshenko’s press office said Ukraine’s president reached agreement with his Russian counterpart Vladimir Putin on Wednesday on a “permanent ceasefire” in eastern Ukraine's Donbass region.
The Kremlin later said steps towards peace had been discussed but there was no formal ceasefire because Russia is not a party to the conflict between Kiev and pro-Russian rebels in Ukraine's eastern Donbass region.
Dollar-traded Russian stocks rose over 4%, while the pan-European FTSEurofirst 300 was up 0.9% at 1,388.11 points. While the rouble was the main mover, the euro was also higher on the day against almost every other major currency.
"With Russia, things are never black and white. There are some questions in the background about how solid this ceasefire actually is. But if this ceasefire can hold and is confirmed, then we could see a nice move higher," said Dafydd Davies, partner at Charles Hanover Investments.
Wall Street futures also rose 0.5%, pointing to a solid start for US markets, while MSCI's broadest index of Asia-Pacific shares outside Japan, already buoyant after strong Chinese services data extended gains, added 1%.
German 10-year bond yields — the euro zone benchmark — pulled off a day’s high of 0.969% but were still up 3 basis points on the day.
Many analysts still remain sceptical about any near-term resolution to the Ukraine conflict which has killed more than 2,600 people since April and provoked the worst crisis in relations between Russia and the West since the Cold War.
US President Barack Obama said any ceasefire could only be effective if Russia stopped “pretending” it was not active in the conflict and stopped sending troops and weapons into the country.
“The key point in all this is that we’ve got some fairly untrustworthy protagonists in this whole affair. And even if we do get an agreement the market is going to be pretty sceptical as to quite how binding it's going to be, how long it might hold, and indeed whether we'll be back to square one in next to no time,” Chris Scicluna, head of economic