San Francisco Frontiers - Most markets rally on Russia pledge, but traders cautious

The announcement, after talks between the two sides in Turkey, sparked a rally on US and European markets while sending oil prices tumbling.

Russia's deputy defence minister Alexander Fomin said there was progress on "the neutrality and non-nuclear status" of Ukraine -- two central Russian concerns.

And Kyiv's negotiator David Arakhamia said there were "sufficient" conditions for President Volodymyr Zelensky and his Russian counterpart Vladimir Putin to meet in a push to end the crisis.

However, the excitement was tempered as world leaders greeted the news with scepticism, with Joe Biden saying he wanted to see if Moscow will "follow through" on a promise to de-escalate.

And the Pentagon said Putin had merely repositioned a "small number" of forces near Kyiv but could be preparing a "major offensive" elsewhere.

The strong gains on Wall Street and in Europe were largely matched in Asia, with Hong Kong, Shanghai, Sydney, Seoul, Singapore, Mumbai, Taipei, Manila, Jakarta and Wellington all performing well. Tokyo bucked the trend by falling.

London edged up in opening exchanges, though Paris and Frankfurt dipped.

"The first sign of good news, no matter how tenuous, from the Ukraine-Russia talks resulted in a mass stampede into equities," said OANDA's Jeffrey Halley.

"Asian markets, as desperate for any good news from the Eastern front as anyone else, have reacted by rallying strongly."

But there are warnings that traders may have run ahead of themselves.

Alexander Rodnyansky, an adviser to Zelensky, told Bloomberg TV: "It's perplexing to some extent to see that markets are reacting as strongly as they are.

"The only thing that will bring them really to the negotiating table is the success of Ukraine on the battlefield and further economic pressure, in terms of sanctions."

And Moscow-based political analyst Evgeny Minchenko added: "I think there was very serious misunderstanding of what both sides said in Istanbul after the talks.

"So far I just heard is that there will be less action near Kyiv and Chernigiv, because the Russian army is concentrating its resources against the Ukrainian army in (the eastern region of) Donbas."

And by Tuesday evening Ukraine's general staff -- while confirming Russian units were withdrawing from the Kyiv and Chernigiv regions -- said it was most likely a troop rotation intended to "mislead" Ukraine's military.

"We're not prepared to call this a retreat or even a withdrawal," Pentagon spokesman John Kirby said, warning a "major offensive" may yet be imminent in other areas of Ukraine and that the threat to Kyiv was not over.

Oil prices rose in Asian business after initially tumbling on the Russian announcement, which sent WTI briefly dipping below $100.

Speculation about a hefty drop in demand caused by a lockdown of more than 20 million people in Shanghai, China's biggest city, and hopes for progress in Iran nuclear talks were also weighing on prices.

Crude remains elevated on continued worries about supplies caused by the Ukraine war, while analysts said there was an expectation that OPEC and other major producers including Russia will decide against lifting output at their monthly meeting this week.

Traders will be keeping an eye on the release of US jobs data Friday, which will give a fresh snapshot of the world's top economy in light of surging inflation and the heightened uncertainty caused by war.

A strong reading could spur the Federal Reserve to act more aggressively to fight surging prices, with some commentators predicting several half-point interest rate hikes this year.

The battle central banks face in getting prices under control was underlined Wednesday with data showing Spanish inflation hit a 37-year high in March, in line with similar surges around the world, owing to a spike in energy costs caused by the war.

- Key figures around 0720 GMT -

Tokyo - Nikkei 225: DOWN 0.8 percent at 28,027.25 (close)

Hong Kong - Hang Seng Index: UP 1.9 percent at 22,352.34

Shanghai - Composite: UP 2.0 percent at 3,266.60 (close)

London - FTSE 100: UP 0.1 percent at 7,544.22

West Texas Intermediate: UP 2.6 percent at $106.92 per barrel

Brent North Sea crude: UP 2.4 percent at $112.86 per barrel

Euro/dollar: UP at $1.1131 from $1.1090 late Tuesday

Pound/dollar: UP at $1.3130 from $1.3094

Euro/pound: UP at 84.80 pence from 84.66 pence

Dollar/yen: DOWN at 121.81 yen from 122.77 yen

New York - DOW: UP 1.0 percent at 35,294.19 (close)

O.Anderson--SFF