GLOBAL MARKETS-Europe rallies on Ukraine peace deal hopes

Updates ahead of Wall Street open, adds details on European market rally

By Marc Jones

LONDON, Feb 13 (Reuters) - Europe's main stock markets and currencies rallied on Thursday on growing optimism about a peace deal between Ukraine and Russia, and as bond buyers overcame the latest wobble triggered by stubbornly high U.S. inflation data.

Persisting trade war concerns kept gold close to an all-time high after U.S. President Donald Trump reiterated his plans to impose reciprocal tariffs on every country that has duties on U.S. goods.

The euro's EUR=EBS bounce left it at just above $1.04. Trump held what he described as great talks with Russian President Vladimir Putin and Ukraine's Volodymyr Zelenskiy on Wednesday and said he saw a good possibility of ending the near three-year-long war.

Bets that might also lead to an easing of Russian oil sanctions saw Brent crude test its lows of the year and sent the rouble RUB= on a 3% tear. Europe's record-high STOXX 600 .STOXX added to its recent 8% surge too, although Wall Street's S&P 500 ESc1 and Nasdaq NQc1 futures were a fraction weaker. O/R.N

ING currency strategist Chris Turner said a peace deal in Ukraine could be an "important positive" for European countries if it delivered lower energy prices and led to a Marshall Plan-style rebuilding of Ukraine.

"The rally may have a little further to run," he added, although the stiff headwinds of potential U.S. tariffs on Europe and high U.S. rates "will limit the EUR/USD upside".

As well as a higher euro, the Swiss franc was up CHF= against the dollar and Britain's pound rose 0.3% GBP=D3 as data showed the British economy saw unexpected modest pick-up at the end of last year.

Overnight in Asia, Japan's Nikkei .N225 had gained 1.3% thanks to a much weaker yen. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose as much as 1.2% to hit its highest since early December. .T

Chinese blue chips .CSI300 saw a late dip to end their day down 0.2%, as did Hong Kong's Hang Seng index .HSI after it had hit another four-month high.

The bond markets were still digesting Wednesday's January U.S. consumer price data that posted the biggest rise in nearly 1-1/2 years. The closely watched core inflation index, which excludes food and energy prices, rose 0.4% in the month, above forecasts for 0.3%.

With the Federal Reserve already signalling no rush to cut rates further, investors scaled back expectations of more policy easing from the Federal Reserve this year to just 28 basis points, equivalent to just one cut.

Benchmark Treasury yields - which tend to drive global borrowing costs - had jumped to a three-week top of 4.66% US10YT=RR. But they were receding again on Thursday, drooping back to 4.6% while Germany's 10-year Bund yield DE10YT=RR was dipped to 2.43%, having jumped 12 basis points over the previous two sessions. GVD/EUR

Germany's ECB rate setter Joachim Nagel had reiterated on Wednesday that it needed to take rate cuts gradually. Analysts at Barclays, meanwhile, expect only one rate cut at most from the Fed this year.

"Risks are now skewing toward the Fed delivering no cuts this year, and we are putting somewhat more weight on off-baseline scenarios where rate hikes enter the conversation," they said in a note to clients.

'JEALOUSY AND RAGE'

Ukraine's government bonds continued to climb on the peace hopes, although there was worry among top European politicians that a deal was being forced on Kyiv and could encourage more Russian aggression in future.

Lithuanian Defence Minister Dovile Sakaliene warned that Europe should not fall "under the illusion that Mr. Trump and Mr. Putin are going to find the solution for all of us" as that would be a "deadly trap".

"Frigid spinster Europe is mad with jealousy and rage," Dmitry Medvedev, a former Russian president, wrote on Telegram. He said Europe had not been warned of the Putin-Trump call or consulted about its content.

"It shows its real role in the world," he said. "Europe's time is over."

Not for Europe's carmakers though it seemed. They raced 3.6% .SXAP higher in the sector's best day in nearly a year. Russia was a highly profitable market for many major firms before Moscow's 2022 invasion of Ukraine.

Back in FX markets, the dollar JPY=EBS was 0.2% weaker at 154.15 yen, having jumped 1.3% on Wednesday. The yen was licking its wounds at 153.95 yen per dollar, although it remained up about 2% for the year so far.

Among the main commodities, oil prices extended their recent fall as the hopes for a Russia and Ukraine peace deal bolstered the possibility of an easing of Russian oil sanctions that have disrupted supply flows.

U.S. crude CLc1 fell 1.4% to $70.36 a barrel, after dropping 2.7% overnight, and Brent LCOc1 was also 1.4% lower at $74.12, having dropped 2.4% overnight.

Gold XAU= rose 0.4% to $2,915 per ounce, not far from its record high of $2,942.70 hit on Tuesday.