LONDON - Europe's main stock markets and currencies rallied on Thursday on growing optimism about a peace deal between Ukraine and Russia, and as bond buyers overcame their latest wobble after stubbornly high US inflation data.

Persisting trade war concerns kept gold in demand after US President Donald Trump reiterated his plans to impose reciprocal tariffs on every country that has duties on US goods.

The euro's bounce left it up 0.3 percent at $1.041, helped by Trump's phone calls with Russian President Vladimir Putin and Ukraine's Volodymyr Zelenskiy on Wednesday, which raised hopes of an end to the near three-year-long conflict.

Oil prices fell for a second day, testing some key support levels, while Europe's record-high STOXX 600 added to its 8 percent surge this year, although Wall Street's S&P 500 and Nasdaq futures were back in the red.

ING currency strategist Chris Turner said a peace deal in Ukraine could be an "important positive" for European countries if it delivered lower energy prices and led to a Marshall Plan-style rebuilding of Ukraine.

"The rally may have a little further to run," he added, although the stiff headwinds of potential US tariffs on Europe and high US rates "will limit the EUR/USD upside".

As well as a higher euro, the Swiss franc was up against the dollar and Britain's pound rose 0.3 percent as it was also helped by data showing an unexpected modest pick-up in the British economy at the end of last year.

Overnight in Asia, Japan's Nikkei had gained 1.3 percent thanks to a much weaker yen. MSCI's broadest index of Asia-Pacific shares outside Japan rose as much as 1.2 percent to hit its highest since early December.

The bond markets were still digesting Wednesday's January US consumer price data that posted the biggest rise in nearly 1-1/2 years. The closely watched core inflation index, which excludes food and energy prices, rose 0.4 percent in the month, above forecasts for 0.3 percent.

With the Federal Reserve already signaling no rush to cut rates further, investors scaled back expectations of more policy easing from the Federal Reserve this year to just 28 basis points, equivalent to just one cut.

Benchmark Treasury yields - which tend to drive global borrowing costs - had jumped to a three-week top of 4.66 percent. But they were receding again on Thursday, dropping back to 4.61 percent while Germany's 10-year Bund yield was flat at 2.475 percent, having jumped 12 basis points over the previous two sessions.

Germany's ECB rate setter Joachim Nagel had reiterated on Wednesday that it needed to take rate cuts gradually. Analysts at Barclays, meanwhile, expect only one rate cut at most from the Fed this year.

"Risks are now skewing toward the Fed delivering no cuts this year, and we are putting somewhat more weight on off-baseline scenarios where rate hikes enter the conversation," they said in a note to clients.

'Jealousy and rage'

Ukraine's government bonds continued to climb on the peace talk hopes, although there was angst among top European politicians that a deal was being forced on Kyiv and could encourage more Russian aggression in future.

"Frigid spinster Europe is mad with jealousy and rage," Dmitry Medvedev, a former Russian president, wrote on Telegram. He said Europe had not been warned of the Putin-Trump call or consulted about its content.

"It shows its real role in the world," he said. "Europe's time is over."

Back in FX markets, the dollar was 0.2 percent weaker at 154.15 yen, having jumped 1.3 percent on Wednesday. The yen was licking its wounds at 153.95 yen per dollar, although it remained up about 2 percent for the year so far.

Among the main commodities, oil prices extended their recent fall as the hopes for a Russia and Ukraine peace deal bolstered the possibility of an easing of Russian oil sanctions that have disrupted supply flows.

US crude fell 1 percent to $70.64 a barrel, after dropping 2.7 percent overnight, and Brent was also 1 percent lower at $74.43, having dropped 2.4 percent overnight.

Gold rose 0.5 percent to $2,918 per ounce, not far from its record high of $2,942.70 hit on Tuesday.