Trump and Putin could meet for the first time since 2019. How are traders preparing for it?

Investors began buying up assets that could benefit from a possible peace deal between Russia and Ukraine following news of Donald Trump's readiness to meet with Vladimir Putin. For example, Ukraine's dollar bond yields, the exchange rate of several Eastern European currencies, and stocks of companies linked to Russia and the region rose. The Kremlin has confirmed preparations for a meeting between the presidents, but the U.S., Bloomberg has learned, is demanding that Putin first agree to talks with Ukrainian President Volodymyr Zelensky as well. 

Against the backdrop of a possible meeting between the U.S. and Russian presidents, traders have started buying assets that could benefit from a peace agreement on Ukraine, reported Bloomberg. For example, Ukraine's dollar-denominated bonds were the best-performing among emerging and frontier markets tracked by Bloomberg. Eastern European currencies strengthened: for example, the Polish zloty added 0.5% against the euro. The index of Ukrainian shares traded in Warsaw showed the maximum growth since April. In Hong Kong, shares of Russian aluminum producer Rusal International, one of the few Russian issuers traded on major world markets, rose sharply.

Shares of Austrian Raiffeisen Bank, which continues to operate in Russia, soared by almost 14% on the trading floor in Vienna. Shares of Hungarian OTP Bank, also remaining on the Russian market, updated the record. The "Ukraine recovery basket" collected by UBS also reached a maximum, Bloomberg writes. 

In the "isolated" markets of Russia itself, the MosBirch index added 4%, and the ruble strengthened by 0.9% against the dollar and became one of the strongest currencies of the day, Bloomberg writes. At the same time, only residents and investors from "friendly" countries, such as the UAE and Kazakhstan, can trade these assets, the agency said.

In contrast, Goldman Sachs' basket Goldman Sachs of European defense stocks sagged 5.5%, hitting their lowest since May. On Thursday, shares of German arms manufacturer Rheinmetall plummeted by 8% as its financial results for the last quarter were weaker than forecast.

"The market is pinning hopes that a face-to-face meeting between Trump and Putin could be a turning point toward ending the Russia-Ukraine war," Sergei Dergachev, an asset manager at Union Investment Privatfonds in Frankfurt, said in a Bloomberg statement. He is betting on securities that could benefit from a peace agreement, including bonds from banks in Hungary and the Czech Republic, as well as corporate debt from Turkish and Uzbek issuers.

Roger Mark, a debt market analyst at Ninety One UK in London, also assessed the potential summit positively, but emphasized: further growth of Ukrainian assets is possible only with tangible peaceful progress. "All eyes will now be on the content of the negotiations," he noted (quoted by Bloomberg).

Some analysts are more reserved about the prospects for a settlement. "I wouldn't share the current market optimism," Kieran Curtis, a portfolio manager at Aberdeen Group Plc in London, told Bloomberg. - There have been no real steps toward compromise from Russia in recent months, and I doubt one meeting can dramatically change the situation."

A possible meeting between the two leaders, which would be the first since 2019, could signal progress in discussions on ending the war between Russia and Ukraine, notes Bloomberg. The moves in markets are reminiscent of January's rally, when investors hoped Trump would fulfill campaign promises and achieve a quick peace in Ukraine, the agency said. However, those expectations collapsed after the U.S. president's unsuccessful attempts to convince Putin to go for a cease-fire.

Since then, Washington's rhetoric has toughened, with Trump promising to impose tough economic measures against Russia if a ceasefire is not reached by August 8. In addition, despite today's rise, many assets remain still below the levels of February, a period when the market was counting not only on the end of the war, but also on the easing of sanctions against Russia, emphasizes Bloomberg.

Trump's intention to meet soon with Putin was first reported on August 6 - after talks held in Moscow by Trump's special envoy Steve Whitkoff. That said, according to The New York Times' sources, Trump wanted to talk to Putin first and then have another three-person negotiation with Zelensky.

The Kremlin on August 7 reported that at the meeting with Whitkoff "an agreement was agreed in principle on holding in the next few days a bilateral meeting" - Putin and Trump. The option of a trilateral meeting by Whitkoff "was simply mentioned" and Russia "left this option entirely, completely without comment," the Kremlin added.

The United States, as confirmed by Bloomberg's White House source, will not agree to a meeting between Trump and Putin without the latter's talks with Zelensky. Putin said on Thursday that he is not against meeting with the Ukrainian president if "certain conditions" are created, but that is "still a long way off," Bloomberg added.

This article was AI-translated and verified by a human editor