Are Investors Betting on the End of the Ukraine War? Financial Markets Stir

# European Defense Stocks and Russia-Ukraine Asset Prices on the Rise This Year (London, Yonhap News) – Financial markets are undergoing a significant reshuffle with the inauguration of the Trump administration, as the likelihood of peace in Ukraine increases, according to the British weekly magazine The Economist on the 9th (local time). # European Assets Show Most Notable Changes In Europe, there is growing anticipation for economic revitalization driven by increased defense spending amidst the severe inflation pressures from energy prices escalated by the Ukraine conflict. Trump’s push for Europe to take more responsibility for its defense has led to a surge in European defense contractor stocks. Companies like Italy’s Leonardo, Germany’s Rheinmetall, and Hensoldt have seen their share prices double following Trump’s re-election. During the same period, shares of U.S. defense contractors Lockheed Martin and L3Harris fell by over 10%. The European Stoxx 600 index has risen 14% in dollar terms this year, and Germany’s DAX index soared over 20%, whereas the U.S. S&P 500 index is on a downward trend. Predictions of the euro’s value dropping to parity with the dollar have also proven incorrect, as the euro has actually increased from $1.02 to $1.08 per euro. # Recovery Signals from the Russian Market Expectations of easing restrictions in the Russian market are prompting preparations among investors. The ruble, after plummeting late last year, has surged 25% against the dollar this year. With speculation of the U.S. lifting sanctions on Russia, shares of Russian-related companies traded in offshore markets have climbed. In the Hong Kong stock exchange, shares of Russian aluminum company Rusal have skyrocketed 61% in dollar terms this year. Austria’s Raiffeisen Bank, which has Russian affiliates, saw its stock rise 39%. Russian authorities are reportedly exploring the return of multinational corporations that withdrew or suspended their Russian operations after the 2022 invasion. Russian media have reported that companies like Coca-Cola, Mastercard, and Visa are considering coming back. # Revaluation of Ukrainian Assets Following Trump’s re-election, Ukrainian assets are also being re-evaluated. According to David Horner of Bank of America, outstanding Ukrainian corporate bonds denominated in dollars or euros total $8.9 billion (approx. 13 trillion KRW). Prices of bonds from major infrastructure companies in energy and rail sectors have risen this year. The swift peace prospects have also been factored into the prices of some Ukrainian sovereign bonds. Certain bonds require Ukraine’s GDP in 2028 to be 25% higher than in 2023 for additional payouts. Of course, these market movements hinge on scenarios where actual peace agreements are realized. After the White House summit between President Trump and Ukrainian President Volodymyr Zelensky ended disastrously last month on the 28th, rapid peace potentials reflected in the market have declined swiftly. The Economist stated, “Attention is now focused on Jeddah, Saudi Arabia, where a U.S.-Ukraine summit is expected. While President Trump may believe that a hardline approach will expedite peace, investors are not as convinced.” cherora@yna.co.kr