Financial markets have taken a hiatus after being whiplashed in recent days on the news flow tracking the Russia-Ukraine conflict, with the threats from Western countries through sanctions and the counter threats from Moscow - acting as catalysts for assets' price moves bordering on the disorderly.
Asian shares surged on Thursday, tracking Wall Street's gains in the previous session, with the S&P 500 posting its biggest one-day percentage gain since June 2020 and the Nasdaq tallying its most significant rise since March 2021 as oil prices posted their deepest plunge since the early pandemic days nearly two years ago.
While oil prices regained some footing, having fallen more than 12 per cent on Wednesday as the market weighed whether major producers would boost supply to help plug the gap in output from Russia due to sanctions for its invasion of Ukraine.
That even as 'flight to safety' bets have eased and the appetite for a general rush into risky assets has jumped.
But analysts warned the rally remains susceptible to reversal as risks from the Russia-Ukraine conflict remain, primarily from higher oil prices on inflation and economic growth.
"Markets seem to have latched on to a couple of slightly less dismal clues as to an excuse to rally hard in the last 24 hours. The basis for that optimism – it's pretty thin. There are talks between Russia and Ukraine today in Turkey - that was already known, and Ukraine President Zelenskyy has also suggested that he is prepared to compromise on issues such as Ukraine's neutrality to end the war - dropping NATO membership was also was in the markets before yesterday," said Robert Carnell, Regional Head of Research for Asia-Pacific at ING.
"So far, (Mr) Zelenskyy says that he is not prepared to cede territory. Yesterday, a potentially new market element was the UAE suggesting that the OPEC+ group should do more to quell oil price increases. However, there has already been some back-pedalling on that, so this feels unlikely to deliver a lasting impact on oil and maybe undermines all the other market moves. Thin markets and short-covering probably helps explain a good chunk of the last 24 hour's market moves, which have seen oil swing from $135/bbl to $112," he added.
Russia's foreign minister Sergei Lavrov arrived in Turkey ahead of planned talks on Thursday with his Ukrainian counterpart Dmytro Kuleba for the first meeting between the two since Russia invaded Ukraine two weeks ago.
Mansoor Mohi-uddin, a chief economist at the Bank of Singapore, told Reuters that financial markets rallied, hoping that Ukraine and Russia may start to negotiate more seriously on their differences.
"The reaction, however, is unlikely to prove sustainable as the two countries have major differences still and the military conflict looks set to intensify with Russia aiming to capture Ukraine's key cities."
Indeed, Indian equity bourses started the day on a high, while the rupee recovered for the second straight session after hitting fresh record lows repeatedly in recent days. The FX markets have borne the brunt of volatility.
"As can be said for many other financial instruments, developments in FX are bordering on the disorderly. With commodity markets now taking another leg higher on speculation over embargoes on Russian exports, fears of stagflation in Europe will continue to build. Expect European FX and most emerging market currencies to remain under pressure," noted analysts at ING.