FTSE soars as Russia says it will reduce military activity around Kyiv

European stocks pushed higher on Tuesday after Russia’s defence ministry said it will “drastically” reduce military activity outside Ukrainian capital Kyiv and northern city Chernihiv.

However, despite Russia’s announcement, UK prime minister Boris Johnson said that a ceasefire between the Kremlin and Ukraine would not be cause to lift UK sanctions on Russia.

A spokes person for Johnson said that the “pressure” on president Vladimir Putin “must be increased” both through further economic measures and by providing military aid to ensure Russia changes course entirely.

The FTSE 100 (^FTSE) wiped out its Ukraine losses, rising 1.4% to levels last seen before the invasion, it closed 0.7% up. France’s CAC (^FCHI) was 2.8% higher and the DAX (^GDAXI) added 2.5% in Germany.

Sterling (GBPUSD=X) dropped near to a 14-day low against the dollar after Bank of England governor Andrew Bailey warned on rising energy prices and pointed to evidence of an economic slowdown. The pound fell to $1,308 against the dollar, and was 0.6% down against the euro (GBPEUR=X).

Read more: Bank of England’s Bailey: ‘Historic’ energy shock larger than any year in 1970s

Meanwhile, the Russian ruble (RUBUSD=X) hit a one-month high against the US dollar, rising 2% to trade at $88. This was boosted by gains in Russian stocks on their fourth day of trading since the Moscow Stock Exchange (IMOEX.ME) reopened.

“While early days yet, the positive noises coming from talks in Turkey have helped stock markets to move higher, while oil prices are coming under pressure for a second day,” said Chris Beauchamp, chief market analyst at online trading platform IG.

Read more: Oil prices dip as Shanghai enters phased COVID lockdown

Oil prices continue to slide ahead of an OPEC+ meeting amid fears of lower demand from China as Shanghai applied a “zero-COVID” stance.

Brent crude (BZ=F) fell 5.4% to $106.42 a barrel. US light crude (CL=F) was 5.7% lower to $99.94 in electronic trading on the New York Mercantile Exchange at the time of writing.

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Prices in other commodities including wheat and corn also plunged as Tuesday’s peace talks in Turkey boost hopes of a de-escalation in the Ukraine war, easing worries about supply disruption.

Wheat slumped as much as 7.9%, dropping below the $10 a bushel mark for the first time since early March, while Corn sank 3.6% to a three-week low, and Minneapolis wheat dropped by the maximum allowed.

“The resilience of global stocks given the cocktail of risks facing the global economy is truly impressive but this stoicism is likely to face continuing tests as the impact of mounting prices and the actions of central banks continue to feed through,” said Russ Mould investment director at AJ Bell.

Read more: UK house prices surge to £245,200 amid ‘unreasonably’ high demand

Across the pond, US benchmarks continued to rally on Tuesday as ceasefire talks between Russia and Ukraine helped lift investor optimism.

Wall Street’s S&P 500 (^GSPC) advanced 39.87 points, or 0.9%, to 4615.39, the tech-heavy Nasdaq (^IXIC) increased 1.3%. The Dow Jones (^DJI) added 1% at the time of London’s close.

US job openings remained near a record highs in February, continuing a trend that the US Federal Reserve views as a major driver of inflation. The latest data from the Labor department shows there were 11.3 million available jobs last month, matching January’s figure and just below December’s record of 11.4 million. The number of Americans quitting their jobs was also historically high, at 4.4 million.

In government bond markets, the yield on the benchmark 10-year note (^TNX), which moves inversely to its price, climbed to 2.4%, while the yield on the two-year note surged to 2.3%. This is a gauge of future interest rates and underpins global borrowing costs. Investors will closely watch for the possibility of a so-called yield inversion, where the two-year note yields more than the 10-year, which is historically tracked as a predictor of recession.

Analysts fear that an inversion could spook markets and raise concerns that a more hawkish stance from the Federal Reserve and another rates hike could induce a recession in the country.

Richard Hunter, head of markets at Interactive Investor, said: “Although the inversion was brief, it underlines some concern among investors that if the Federal Reserve was to tighten monetary policy too quickly and aggressively in its efforts to combat inflation, it could induce a recession. “

Overseas markets were mixed overnight following a strong bounce on Wall Street as lower oil prices and hopes of peace talks between Russia and Ukraine helped boost sentiment. The MSCI’s broadest index of Asia-Pacific shares excluding Japan was up 0.4%.

Asian stocks were lifted by a surge in Japanese shares as the Bank of Japan vowed to keep monetary policy ultra-loose, offering to buy unlimited government bonds for the first four days of this week, to stop yields rising.

The Nikkei (^N225) rose 1.1% in Japan, while the Hang Seng (^HSI) edged 0.9% higher in Hong Kong. The Shanghai Composite (000001.SS) drifted 0.3% lower.

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