The European stock rally is overheating and is due for a pause as investors have gotten overly optimistic about a potential ceasefire in Ukraine.

Ukraine bonds extended a rally after President Trump said Wednesday that President Vladimir Putin of Russia had agreed to peace talks around Ukraine. The remarks, via Trump's Truth Social account, saw oil futures extend losses and the dollar pull back — and allowed U.

U.S. and European stock futures rallied on Thursday on optimism over prospects of a peace deal between Ukraine and Russia, offsetting a jump in Treasury yields as hot inflation threatens to close the door to any policy easing in the U.