Following a meeting between former US President Donald Trump and Russian President Vladimir Putin in Alaska, a new initiative has emerged aiming to end the war in Ukraine. Trump has proposed a trilateral meeting involving Putin and Ukrainian President Volodymyr Zelenskyy to find a diplomatic solution to the conflict. This proposal comes amid ongoing fighting, with reports of five deaths in a Russian attack in the Donetsk region, while the Ukrainian military announced advances in the Sumy region.

Meanwhile, Slovak Prime Minister Robert Fico praised the Trump-Putin summit, echoing the Kremlin's narrative on the causes of the Russian invasion. Ukrainian President Zelenskyy, for his part, expressed concern over Russia's refusal to implement a ceasefire, deeming it a complication for peace efforts. Zelenskyy indicated that Russia's unwillingness to comply with a simple order to cease its attacks would require significant efforts to convince Russia to implement something much more important, such as peaceful coexistence.

These developments coincided with reports that American staff from Trump's team left sensitive documents, including the summit's agenda and delegation details, at a hotel in Alaska. Trump aims to organize the trilateral meeting by Friday, provided his talks with Zelenskyy in Washington go well.

Market Signals

The defense sector experienced volatility, with shares of companies like BAE Systems, Rolls-Royce, Rheinmetall, and Thales falling, while Babcock and Leonardo saw increases. This indicates a mixed reaction, with some investors focusing on continued NATO spending commitments.
Oil markets were anticipated to react with muted price movements, as the continued flow of Russian oil without immediate disruption from new sanctions is seen as bearish for prices.
Global markets were expected to open positively due to the "understanding" reached between Trump and Putin, which eased some geopolitical tensions. However, the lack of a concrete deal means uncertainty remains.

Winners & Losers

Putin may have benefited from portraying progress without making significant concessions, gaining time for his ongoing military operations. Conversely, the continuation of the conflict without a ceasefire means the human and economic costs will continue for Ukraine. Some European defense stocks also saw declines, possibly due to the perception of being sidelined or the potential for reduced immediate tensions.

Action Timeline

Immediate (24-48h): Monitor news and statements from Trump, Zelenskyy, and European leaders following their calls. Analyze defense stock performance and assess commodity price trends.
Short-term (1-2 weeks): Track the outcomes of calls between Trump, Zelenskyy, and European leaders for clarity on the geopolitical situation. Investors might consider rotating into companies with strong NATO spending commitments.
Long-term: Evaluate potential structural changes in the defense sector and markets linked to the Ukraine conflict based on any future agreements.

Risk Assessment

The fundamental conflict in Ukraine remains unresolved, carrying the risk of continued instability and escalation.
Markets could remain sensitive to future geopolitical developments due to the lack of a decisive outcome from the meeting.
The possibility of future sanctions remains a risk for companies dealing with Russia, despite Trump's delay in deciding on secondary sanctions.

Key Indicators

Future calls between Trump, Zelenskyy, and European leaders signal potential geopolitical developments.
US sanctions policy towards Russia is a key indicator of future economic developments.

Regional Perspective

The unique perspective is Trump's proposal for a trilateral meeting with Putin and Zelenskyy to discuss peace in Ukraine. While Ukraine seeks a ceasefire, Russia appears unwilling to grant one, complicating peace efforts.

Immediate Implications

Continuous monitoring of news flow and statements is required.
There is an opportunity to make swift investment decisions based on developments in the defense sector and commodity markets.

What to Watch

Expected outcomes of calls between Trump, Zelenskyy, and European leaders.
The possibility of a trilateral meeting between Trump, Putin, and Zelenskyy.
Any shifts in US sanctions policy towards Russia.

Analysis

The proposal for a trilateral meeting indicates a new attempt to find a diplomatic solution, but the absence of a ceasefire from the Russian side casts doubt on the possibility of tangible progress. The defense sector remains on alert, and global markets could be affected by fluctuations in geopolitical tensions.