LONDON — News of an apparent cease-fire agreement in eastern Ukraine lit up European stock markets on Wednesday as investors hoped it would lead to a political situation where the West and Russia might withdraw their economic sanctions.
KEEPING SCORE: Germany's DAX was up 1.2 percent to 9,622 while the CAC-40 in France rose 1.1 percent to 4,428. The FTSE 100 index of leading British shares was 0.8 percent higher at 6,822. Unsurprisingly, Russian shares outperformed, with the benchmark MICEX index trading 2.9 percent higher. Wall Street was poised for a solid opening, with both Dow futures and the broader S&P 500 futures 0.3 percent higher.
UKRAINE CEASE-FIRE: The positive mood in markets is largely a result of the cease-fire agreement that was announced by the office of Ukrainian President Petro Poroshenko. Details of the apparent agreement with Russian President Vladimir Putin remain sketchy and there was no immediate indication that the fighting would stop, or has stopped. Ukraine and the West have accused Russia of sending troops and weapons to support pro-Russian insurgents who have been fighting government troops in eastern Ukraine since mid-April. Moscow has vehemently denied this charge.
ANALYST TAKE: Craig Erlam, market analyst at Alpari, said the reports of a cease-fire have been "welcomed with open arms by the markets." The hope in the markets, he said, must be that painful economic sanctions between the West and Russia are soon lifted and that the European economy can reclaim some recent lost ground. "We can't forget that the effects of the crisis have been felt in many countries beyond those directly involved," said Erlam.
AILING EUROPE: The crisis in Ukraine has been one of the reasons why the European economic recovery has been so underwhelming this year. Figures earlier showed the extent to which the crisis in the country has weighed on business confidence across the continent. In its monthly survey, financial information company Markit highlighted tensions in Ukraine for a sharp fall in its gauge of business activity for the 18-country eurozone. Before the cease-fire news, many economists were predicting further measures from the European Central Bank on Thursday to stimulate the 18-country eurozone economy.
SOLID US: Contrasting Europe, the U.S. economy continues to show strength. On Tuesday, the Institute for Supply Management, a trade group, said its gauge of manufacturing struck a three-year high in August, boosted by new orders for goods and increased production. This week's run of economic data, which culminates with Friday's closely watched nonfarm payrolls report for August, could go a long way to determining when the Federal Reserve will raise interest rates.
ASIA'S DAY: Earlier, Asian markets had enjoyed some support before the cease-fire news. Japan's Nikkei 225 rose 0.4 percent to 15,728.35 while Hong Kong's Hang Seng jumped 2.3 percent to 25,317.95. Stock markets in mainland China and Southeast Asia also rose. But Australia's S&P/ASX 200 was flat at 5,656.10 and South Korea's Kospi was little changed at 2,051.20.
CHINA SILVERLINING: An HSBC report showed that activity expanded at the fastest rate in 17 months in China's services industries. That was a rare encouraging sign from the world's No. 2 economy, which has slowed from double-digit rates of expansion. The HSBC China Service Business Activity Index rose to 54.1 in August from 50 in July.
ENERGY: The positive sentiment generated by the cease-fire news helped support oil prices. Benchmark U.S. crude for October delivery was up 51 cents at $93.38 a barrel in electronic trading on the New York Mercantile Exchange.
CURRENCIES: Unlike stock markets, there was little going on among currencies. The euro was up 0.1 percent on the day at $1.3152 while the dollar fell the same rate to 105.04 yen.
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Youkyung Lee in Seoul, South Korea contributed to this report.
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