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Investors appeared to latch on to a hint of optimism around prospects for quelling the Russia-Ukraine war Wednesday, spark major reversals across markets, with commodities retreating alongside traditional havens as beaten-down global equities bounced sharply higher.

“It has been almost two weeks since Russia invaded Ukraine and it appears that traders are becoming a little optimistic a compromise could happen after Ukrainian President [Volodymyr] Zelensky’s comment that he had ‘cooled down’ about Ukraine’s bid to join NATO, which was one of the driving factors behind Russian’s invasion,” said Edward Moya, senior market analyst at Oanda, in a note.

Analysts also pointed to remarks by Russia’s foreign ministry spokeswoman, who said Moscow would prefer to achieve Ukraine neutrality though talks, according to Reuters.

At the same time, Russian forces continued to advance on Ukrainian cities. A Russian airstrike on Wednesday hit a maternity hospital in the besieged city of Mariupol, trapping people, including children, under the rubble, according to Ukraine authorities.

Time will tell whether the moves signal a sea change or are merely a temporary unwind after sharp, volatile moves across financial and commodity markets following Russia’s Feb. 24 invasion of Ukraine, analysts said. The U.S. and its allies have responded with sweeping sanctions aimed at disconnecting Russia from the global financial system, threatening the country with economic collapse and raising jitters over global financial stability.

“There are still many forks in the road here on where things may ultimately go geopolitically,” said Brad Bechtel, global head of FX at Jefferies, in a note. “The market is trading like we are approaching that area where we can compartmentalize the Ukraine situation and focus back on the macro and idiosyncratic drivers, but I don’t agree that we are there yet.”

The fallout from economic sanctions will have a lasting impact on inflation, supply chains and geopolitics, Bechtel said.

See: Ukraine invasion stokes stagflation worries because Russia is a ‘commodity superstore’

The invasion has sparked a global commodity shock, pushing oil futures to nearly 14-year highs, driving wheat futures toward all-time highs and lifting prices for crucial industrial metals. On Wednesday the U.S. crude oil benchmark CL.1, -12.06% dropped $7.41, or 6% to $116.29 a barrel on the New York Mercantile Exchange after ending Tuesday at its highest since July 2008 when President Joe Biden banned U.S. imports of Russian oil and other energy.

Read: $200 crude? ‘Anything could happen’ to oil prices as market grapples with Russia sanctions, says top commodity trader

Wheat futures W00, -6.61%, which last week soared more than 40% for the biggest weekly rise on record, were locked limit down Wednesday at $12.015 a bushel. Exports from the Black Sea have been shut down as a result of the fighting. Together, Russia and Ukraine account for nearly a quarter of global wheat exports, while the war has also stirred fears about this summer’s Ukraine harvest.

Also see: The Russia-Ukraine war is fueling the ‘biggest supply shock to global grain markets’ in living memory

Meanwhile, traditional investment havens, which had soared in response to war, fell sharply but remain highly elevated relative to their pre-invasion levels. The ICE U.S. Dollar Index DXY, -1.02%, a measure of the currency against a basket of six major rivals, was down 1%, on track for its biggest one-day loss since March 26, 2020. The index hit a 21-month high last week.

Check out: Will Russia-Ukraine war spark a dash for U.S. dollars? Here’s what to watch.

The DXY’s drop reflected in part a rebound by the euro EURUSD, +1.52%, up 1.6% to $1.1074. The euro slumped after the invasion of Ukraine, with the eurozone seen bearing the brunt of the economic and inflationary hit from the war among developed markets.

Gold futures GC00, -2.70% were down 2.5% near $1,990 an ounce after ending near a record high on Tuesday. Treasury yields, which move the opposite direction of price, were also on the rise.

U.S. stocks, meanwhile, bounced sharply, sending the Dow Jones Industrial Average DJIA, +2.08% up more than 760 points, or 2.3%, while the S&P 500 SPX, +2.64% surged 2.8% and the Nasdaq Composite COMP, +3.48%, which fell into a bear market earlier this week, roared back by 3.5%.

Source: This post first appeared on http://marketwatch.com/

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