(Reuters) – Investors were stunned on Friday after Ukrainian President Volodymyr Zelenskiy’s meeting with U.S. President Donald Trump ended in disaster, adding uncertainty to financial markets already jittery due to weakening economic data and volatility around U.S. trade policies.
The two leaders traded verbal blows before the world’s media at the White House, pushing markets to react with a risk-off bid for safe-haven Treasuries as the public spat added uncertainty over the prospect of a peace deal with Russia.
“It’s disturbing,” said Jack McIntyre, portfolio manager at Brandywine Global. “It looked like we were moving towards progress on a peace deal or a ceasefire between Russia and Ukraine and maybe now that gets to come on hold, so you have to price in a little bit more uncertainty,” he said.
Zelenskiy’s U.S. visit was aimed to keep the U.S. from aligning with Russian President Vladimir Putin, who launched the Ukraine invasion three years ago. Instead, he clashed with Trump and Vice President JD Vance over the war, highlighting Kyiv’s struggle to retain U.S. backing. Trump later accused Zelenskiy of disrespecting the United States.
Benchmark 10-year Treasury yields, which move inversely to prices, declined after the public confrontation and were last seen at 4.23% from about 4.27% earlier on Friday.
European stock futures fell while Wall Street climbed in choppy trading. The Dax and CAC40 futures fell 0.6% and the Eurostoxx 50 futures dropped as much as 1.4% and were last down 0.6%. The S&P 500 index was last up 0.58%. The euro fell by as much as 0.37% to a two-week low of $1.036, before paring some of that decline to trade at $1.0366.
The heated confrontation came amid expectations Trump will soon impose punitive tariffs on key U.S. trade partners, which has raised investor fears of a spike in inflation and a hit to economic growth. He said on Thursday his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, along with an extra 10% duty on Chinese imports.
“The unconventional nature of (the exchange) raised the issue for investors of how unpredictable and uncertain the Trump administration can be,” said Rick Meckler, a partner at Cherry Lane Investments.
“There are so many things happening in this government at once – all of which are to some extent groundbreaking – and this just added one more feature to it. So that’s where the market (took a) leg down a little bit, thinking this is just a sign of a lack of predictability and more traditional approaches to diplomacy,” he said.
Investors were already nervous on Friday after a report closely tracked by the Federal Reserve showed consumer spending slowed last month. This came after recent signs of weak consumer confidence, sluggish manufacturing, and disappointing retail and home sales, which have fueled a bond rally in recent weeks.
Some investors remained hopeful cooler heads will prevail, however.
“Apart from the theatrics, not much changed today from a market standpoint. The good news is that Trump didn’t walk away from the deal completely,” said Jamie Cox, managing partner at Harris Financial Group, referring to an agreement on rare earth minerals between the U.S. and Ukraine that was supposed to be signed on Friday as part of a peace deal with Russia.
“Markets will rocket higher if a deal gets struck because anything constructive would be welcomed after that exchange.”
(Reporting by Sinéad Carew, Amanda Cooper, Davide Barbuscia, Saeed Azhar, Caroline Valetkevitch; Editing by Megan Davies and Daniel Wallis)
