2022/03/29 (023) Column

Istanbul Round Of Negotiations:
Russia Promises To Shut Down Operations In Northern Ukraine
European Stocks Jump, While Dax Ends At 5 Week High,
While US Stock Markets Rise For 4th Session.


Istanbul Round Of Negotiations:
Russia Promises To Shut Down Operations In Northern Ukraine

Russia pledged to scale back its military operations around Kyiv and northern Ukraine at peace talks on Tuesday (March 29). Ukraine, on the other hand, proposed adopting neutral status, albeit with international guarantees that it would be safe from attack. The Russian invasion has already ground to a halt on most fronts due to strong Ukrainian resistance. “In order to strengthen mutual trust and create the necessary conditions for further negotiations and achieving the ultimate goal of reaching an agreement and signing (an) agreement, it was decided to radically and largely reduce military activities in the direction of Kyiv and Chernihiv,” said Russian Deputy Defense Minister Alexander Fomin told reporters. The Russian General Staff will provide more details on these decisions after the Russian delegation returns to Moscow, Fomin added. The talks, held in Istanbul on Tuesday, were the first face-to-face talks between the two sides since March 10. Russia began its invasion of Ukraine on February 24 and has so far been unable to capture any major Ukrainian cities after encountering stiff resistance. The offers presented by Ukraine at the talks were the most detailed that both sides have made public to date.

US Stocks Rise For 4th Session

All three major US stock indexes extended gains on Tuesday, with Dow closing up 339 points, the S&P 500 rising 1.2%, and the Nasdaq climbing 1.8% after Ukraine and Russia claimed progress has been made in cease-fire talks in Turkey. Auto and travel stocks were the biggest gainers with Ford, GM, Caesar’s Entertainment and American Airlines each rising about 5%. On the other hand, energy and materials shares declined as commodities prices pulled back. Meanwhile, Philadelphia Fed President Harker said that he doesn’t think the US is heading for recession and that he expects a 25 bps hike in May but is open to 50 bps if inflation remains high. On the data front, the number of job openings in the United States came at 11.266 million in February of 2022, remaining near an all-time high. Now investors await Friday’s non-farm payroll report to measure the job market’s strength further and gauge the outlook for monetary policy.

US Treasury Yields Pare Gains

The benchmark 10-year Treasury yield bottomed around 2.40%, having touched an almost three-year high of 2.56% earlier this week as investors await critical US economic data to gauge the Federal Reserve’s strategy on monetary policy. Markets anticipate a looming policy tightening cycle with major central banks seeking to tame inflation, currently running at records levels in Europe and 40-year highs in the US. Fed Chair Powell and his rate-setting colleagues continue to make surprisingly hawkish comments leading markets to bet on a higher probability of the Fed lifting rates by 50 bps in May.

European Stocks Jump, Dax Ends At 5-Week High

European equity markets rose sharply on Tuesday, with Germany’s DAX up more than 2.5% to close at 5-week highs after the Russian Deputy Defense Minister said after bilateral talks in Istanbul that the country has decided to cut military activity near Ukraine’s Kyiv and Chernihiv. Also, inflation worries eased as oil prices slipped below the $100-per-barrel mark, extending a 7% fall the day before and moving further away from 14-year highs reached earlier in the month. On the data front, the GfK consumer confidence for Germany fell sharply due to the war in Ukraine and rising inflation. Across sectors, autos surged almost 6% to lead the gains as all sectors traded in positive territory except basic resources and oil and gas, which fell about 2% each.
Turkish Lira Rebounds

The Turkish lira strengthened to 14.6 per USD in the end of March, rebounding from the four-month low of 14.8 as hopes of de-escalation of the Russian invasion of Ukraine momentarily improved the outlook for Turkey’s recovering tourism industry, while increasing demand for riskier currencies. Following talks with the Ukrainian delegation, the Kremlin said that it will scale back its military operations in Kyiv and northern parts of the country. On the monetary policy front, the Central Bank of Turkey held its key borrowing costs steady for the third time since September in its March meeting. Turkey’s annual inflation rate surged to a two-decade high of 54% in February while the unemployment rate remained at a 3-month high of 11.4% in January.