Stocks rally after Putin says some progress in Ukraine talks

Stocks extended their gains on Friday after Russian President Vladimir Putin said there had been some progress in Moscow’s talks with Ukraine, although the rally was not enough to stop shares heading for their fifth consecutive weekly loss.

Putin did not provide any details and recent talks between the two countries have not made much headway.

The war in Ukraine, now in its third week, and the prospect of central banks tightening monetary policy to tame inflation just as the global economy begins to slow has sent financial markets on a rollercoaster ride with wild swings up and -- mostly down.

Data on Thursday showed US inflation at a four-decade high, prompting traders to raise their bets on rate hikes from the Federal Reserve beginning next week and sparking a selloff on Thursday.

The Bank of England is expected to tighten next week, especially after January’s economic growth numbers came in stronger than expected on Friday. A more hawkish than expected European Central Bank this week added to the sense policymakers will not be deterred by the uncertainty wrought by the war in Ukraine and will tighten.

But after another bruising week and with commodity prices down from recent highs, traders looked for reasons to buy back into riskier assets including stocks.

“Overall, central banks now have less flexibility to cushion shocks to equity markets, as they have succeeded in doing over recent years,” said Mark Haefele, Chief Investment Officer Global Wealth Management at UBS.

But he said simply selling out of stocks was not advisable.

“Our view remains that simply selling risk assets is not the best response to the war in Ukraine,” he said, advising investors to reduce equity exposure.

A late rebound in Asia also helped the mood. After slumping early in the day on regulatory worries, Hong Kong’s equity market partly recovered as a source told Reuters consultation between Chinese and US regulators on audit and regulatory cooperation was moving “relatively smoothly”.

By 1215 GMT, the Euro STOXX was up 2.18 per cent (.STOXX) while Germany’s DAX (.GDAXI) gained 2.96 per cent and Britain’s FTSE (.FTSE) 1.75 per cent.

Wall Street futures extended their gains ahead of the US open.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed down 1.2 per cent after Thursday’s drop on Wall Streer spilled into the Asian session. Despite Friday’s rebound, sentiment remains weak across markets.