The race for a slice of the peacemaking pie

Asia wrap

Asian equities extended gains as optimism over potential US-Russia peace talks lifted global risk sentiment, with Chinese markets adding an extra boost. Investors, still digesting hotter-than-expected US inflation data, found solace in cooling oil prices and shifted focus to geopolitical breakthroughs and the possibility of an eventual resolution to the Ukraine conflict.

Regional stocks rallied for a second straight session, with Japan and Hong Kong leading the charge. European futures climbed over 1%, while S&P 500 contracts pointed higher as traders moved past rate cut disappointment and latched onto the renewed diplomatic momentum. Despite lingering inflation concerns, markets are embracing a cautiously optimistic tone, betting that geopolitical progress could stabilize global growth narratives.

In FX markets, the euro strengthened against most of its G10 peers, climbing 0.5% versus the dollar. With markets increasingly discounting the likelihood of immediate Fed rate cuts, the focus has shifted to geopolitical risk premiums and their broader implications for global capital flows. For now, the prospect of de-escalation is fueling risk appetite, even as the inflation outlook remains a lingering concern.

A seat at the table

Everyone wants a piece of the peacemaking pie—and that’s not necessarily bad. As Trump and Putin signal readiness to negotiate an end to the war in Ukraine, China is angling for a seat at the table, quietly floating a proposal through intermediaries to facilitate peacekeeping efforts and host a U.S.-Russia summit.

But there’s a catch: Beijing’s pitch excludes Ukrainian President Volodymyr Zelensky altogether, raising eyebrows in Washington and across Europe. The idea of the U.S. and Russia hashing out the future of Ukraine—without Ukraine—is a non-starter for the West, which has repeatedly pledged to include Kyiv in any talks. The White House wasted no time shutting it down, calling it "not viable at all."

Still, Trump is pressing forward on his own timeline. In a post on Truth Social, he claimed to have had a “lengthy and highly productive” phone call with Putin, during which both leaders agreed to meet in each other’s countries and open immediate talks. Later, from the Oval Office, Trump suggested the first meeting could take place in Saudi Arabia—though he gave no specifics on when.

Meanwhile, Vice President JD Vance, special envoy Lt. Gen. Keith Kellogg, and a delegation of senior officials are heading to Europe, where Vance is expected to lay out the administration’s position at the Munich Security Conference. Behind the scenes, Kellogg has reportedly been working on a list of options for Trump to expedite an end to the war.

China’s involvement, however, is more complex. Xi Jinping is walking a fine line—keen to engage with Trump to avoid an economic confrontation but unwilling to do anything that might jeopardize China’s deepening ties with Moscow. While Beijing may publicly tout its willingness to mediate, its proposal notably lacks any commitment to scaling back economic support for Russia, which has been a lifeline for Moscow throughout the conflict.

For now, Russia is in no hurry to lay down its arms. With steady battlefield gains, Moscow insists the war will continue until all of its objectives—including further territorial expansion and a neutralized Ukraine—are met. The question remains: how much pressure will Trump exert, not just on Russia but also on China, to make peace happen? With tariff threats looming, the trade war could become the new battleground for geopolitical leverage.

Thought of the day

The news we consume is crafted by highly skilled writers whose primary job is to showcase their journalistic prowess. Their focus is on explaining the "why," often providing context and analysis to support their narratives. But here’s the reality—journalists are in the business of being right, not making money in the markets.

As traders, we don’t have the luxury of being fixated on opinions or narratives; the only thing that truly matters is how the market interprets the news. The price action tells the real story. Time and again, we’re faced with a choice: do we want to be right, or do we want to make money? The market doesn’t care about our opinions, and neither should we—better to lose an argument than lose capital.