LIVE MARKETS-What a Ukraine peace deal will mean for European markets

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WHAT A UKRAINE PEACE DEAL WILL MEAN FOR EUROPEAN MARKETS

As Trump and Putin prepare to discuss a possible Ukraine peace deal when they meet later today in Alaska, investors and analysts are busy trying to forecast how a peace deal will change markets.

At this point, not many think a final deal will be reached just yet, but an end to the war this year is seen as more likely.

"The Russian economy is on a better footing than generally believed, probably far from forcing the Kremlin into quick concessions, including a full ceasefire," say JPM analysts.

The Ukrainian economy would benefit from a ceasefire. But European leaders are not keen to accept unfavorable peace terms to Kyiv.

A peace deal would lower gas prices and be a sentiment boost across Europe and a net positive for EMEA FX, analysts say.

Here in detail is how a ceasefire could shape European assets:

- It could drive a stronger euro against the dollar by reducing uncertainty and the threat of the war 'spreading,' say Macquarie Group's analysts. Read more here

- The CE3 currencies - Hungarian forint, Czech crown and Polish zloty - are seen rallying between 1.5% and 2.5% vs euro in an aerial ceasefire with gas market impact scenario, according to JPM. They would jump up to 4% if a full ceasefire is agreed. The Polish zloty could react strongly after its recent underperformance, they say.

- On rates, JPM expects a 25bp rally in CEE on a ceasefire announcement, with HUF rates primed to outperform.

- Ukraine’s sovereign credit would react positively - up between 5 to 12 pts - even to a partial but credible ceasefire proposal, JPM says.

- A peace deal could also help de-risk euro area growth, through lower energy prices and more secure energy sources, Macquarie adds.

- In that light, geopolitical safe-havens Swiss franc and Japanese yen could see outflows

- Defense stocks could hold to recent highs as Macquarie thinks the EU and NATO would not roll back commitments toward higher defense as "the war highlighted the need for the EU to develop greater strategic autonomy, and reduce its reliance on the U.S., for security".

- A ceasefire would be positive for Ukrainian corporates such as DTEK Oil & Gas, Kernel KER.UAX and Naftogaz, which have suffered extensive asset damage from aerial bombardment, JPM adds.

(Joice Alves)

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