Overnight Headlines

*Russa: De-escalation not a ceasefire, talks have a long way to go

*Yen attempts to steady but heading for worst month since 2016

*Oil climbs after two-day fall as investors assess Ukraine talks, dollar lower

*Stock surge is a bear-market trap with curve inverted, warns BofA

US equities closed in the green as optimism abounded over the Ukraine-Russia peace talks. As yields turned lower, so cyclical, growth stocks performed well. The Nasdaq closed higher +1.8%, S&P500 +1.2% and the Dow +1.0%. There were broad based gains with energy the only sector which fell. Asia is mostly higher though Japan is lower on stocks trading ex-dividend. Futures are mixed.

USD retreated amidst signs of progress in peace talks. DXY initially made a high of 99.36 before ending lower by 0.7% to 98.40. EUR jumped higher, through trendline resistance and above 1.11. GBP halted the bearish momentum above pushing 1.31. The yen regained ground against the dollar easing to an intraday low of 121.98.  AUD strengthened and is heading towards 0.7555 resistance. USD/CAD looks to be on its way to support at 1.2453.

Market Thoughts – Ceasefire talks show progress

Western officials may be sceptical at Russia stating it will significantly scale back military activity around Kyiv. But risk sentiment was highly positive. Stock markets in Europe jumped up to 3% and nearly 2% in the US. The euro cheered, closing higher by a big figure. All the euro pairs spiked higher off recent lows.

Oil prices were highly volatile, dropping 9% intraday before capping losses to just over 2% on some of that scepticism. Surging commodity prices especially have been a key driver of markets and inflation expectations. Given the level of uncertainty in the market at the moment combined with tight supply/demand balance, prices will remain extremely precarious. Falling market liquidity will also add further noise in certain markets.

Chart of the Day – Dax breaks out to next Fib level

European assets noticeably surged yesterday on the peace talk and de-escalation news. While the VIX dropped further, the European equivalent also fell. But it remains elevated so there may be more room for uncertainty to fall. This points to more potential upside in European stocks over US equities if the positive outlook continues.

The Dax has a very similar chart to the broader Euro Stoxx 50 index. Prices plunged below 12610 in early March. There’s been a strong rebound since, up to the midway point of the November to March high/low at 14364.

Bullish consolidation saw a break higher yesterday into the 61.8% fib level at 14818. This also resistance from October and May lows from last year. The 100-day SMA sits at 15243 and the 200-day at 15428.