Following the re-election of Donald Trump as US President, investors are optimistic about the prospects for an end to the war in Ukraine. Stock markets, especially in Europe, are showing significant growth, reflecting expectations of stability and possible peace.
The biggest gains were seen in European defense stocks. For example, Hensoldt, Leonardo, and Rheinmetall doubled their pre-election levels, while American giants Lockheed Martin and L3Harris lost more than 10%, which could signal a re-prioritization of military investment.
Interestingly, the European Stoxx 600 index rose 14% in dollar terms, while the American S&P 500 showed a slight decline and the German DAX added almost 25%. This indicates the confidence of European investors in the future of the region.
Investors are particularly paying attention to Russian companies listed on international exchanges. Expectations of a potential easing of sanctions have pushed up shares of Rusal (+61%), Raiffeisen Bank (+39%), and OTP Bank (+23%).
Such trends suggest that global financial circles are including in their forecasts a likely end to the war and Russia's return to a more open economic policy.
A significant indicator of investor expectations is the price of Ukrainian government bonds and corporate debt securities. Bonds of Ukrainian energy, railway and infrastructure companies have been rising since November 2024.
David Hauner of Bank of America notes that bonds maturing in 2028 indicate that speculators assess a high probability of a peaceful end to the conflict. At the same time, Goldman Sachs adds: if Ukrainian GDP grows by 4.7% each year, the country will be able to reach indicators that exceed the 2023 level by 25%.
However, this scenario is only possible under conditions of lasting peace and stability, which further confirms market expectations for a quick end to hostilities.
Despite the general optimism, a skirmish in the Oval Office on February 28th sharply dampened expectations for a quick peace. Analysts say financial markets have not fully recovered since then.
This may mean that while investors are betting on an end to the war, they understand that negotiations will be difficult and peace guarantees will be unstable.
