Global markets steady as Ukraine impact fears ease

Kiev's Independence Square Soldiers are manning Kiev's Independence Square

Global stock markets have steadied on Tuesday, with Russia's main share index up more than 5%, after concerns about Ukraine sparked a sell-off on Monday.

Markets across Europe were higher on Tuesday, with the FTSE 100 up 1.7% and Frankfurt's Dax up 2.5%.

The recovery came despite Russia's threat to abandon the US dollar as the country's reserve currency.

And Russia's top gas producer Gazprom also said it would remove a discount on Ukraine gas prices from April.

However, Alexei Miller, chief executive of the Russian state gas producer, has said Gazprom could lend Ukraine between $2bn (£1.2bn) and $3bn to pay off the country's debt.

The offer comes after Ukraine told Gazprom it would be unable to pay in full for gas deliveries in February, according to Russian news agency Interfax.

What will the IMF do?

The IMF is in town. We know what the Ukrainian government wants from them - loans, and big ones.

But what will the IMF want from Ukraine?

Reforms to stimulate stronger economic growth and to improve the government's financial position.

We know some likely elements from a previous IMF programme, agreed by the Yanukovych government, which was not fully implemented.

Energy will be central. The IMF wants Ukraine to cut the heavy subsidies, which are a strain on the government budget and which encourage inefficient energy use.

The interim Prime Minister, Arseny Yatsenyuk, has said Ukraine will accept whatever conditions the IMF seeks.

Well maybe. But actually imposing the hefty energy price increases that are likely to be called for will be politically challenging for any Ukrainian government.

Watch this space.

But the European Union later said it would help Ukraine pay the $2bn it owes Gazprom.

"Payment of the outstanding Ukraine bills is high up in the European Commission's aid package," EU Energy Commissioner Guenther Oettinger said.

Mr Oettinger said the EU could even supply the country with gas.

EU officials are expected to reveal the details of the Ukraine aid package on Wednesday ahead of an EU leaders' emergency summit on Thursday.

Brussels has offered Ukraine 610m euros (£502m) so far, and reports suggest the 28-member bloc could free up an additional 500m euros.

Meanwhile, US Secretary of State John Kerry has announced a $1bn package of energy subsidies, and told crowds in Kiev that President Barack Obama "is planning more assistance".

No more US dollars

Ukraine's interim government has already said that it needs $35bn to pay its bills over the next two years, and has asked the International Monetary Fund (IMF) for rescue funds.

The IMF is currently in Ukraine and will remain there for 10 days, to assess the economy and begin negotiations over a potential bailout.

"We are ready to respond," IMF managing director Christine Lagarde said last week.

She said the body was also discussing with its international partners how best to help Ukraine "at this critical moment in its history".

US President Barack Obama has said Washington is considering economic sanctions to "isolate Russia".

But on Tuesday Russian President Vladimir Putin said those considering sanctions should think of the damage they may incur.

However, in a move that further calmed markets, he told a news conference he saw no need to use military force in Ukraine's Crimea region at present.

IMF head Christine Lagarde Christine Lagarde says the IMF is "ready to respond"

The MICEX share index was up 5.3%, while the rouble rose 1.2% to 36.09 against the dollar.

Kremlin economic aid Sergei Glazyev had earlier been quoted as saying that if the US imposed sanctions, Russia "would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves".

He said Russia would figure out a way to use a new payment system that was not reliant on US dollars for international transactions.

The EU has also threatened sanctions, but on Monday a British official was photographed holding policy documents that suggest the UK will not seek to curb trade with Russia or close London's financial centre to Russians.

"The lack of coherent response from the West may actually be providing some reassurance to traders that things won't escalate too far, with the reasoning being that the only thing the West will be firing towards Russia are harsh words," said Jonathan Sudaria, a dealer at London Capital Group, in a note to clients.

Oil prices also dropped, with Brent crude down 2.2% to $109.3 a barrel, with investors believing the threat of supply disruption due to the Ukrainian crisis has decreased.

The price of gold, which normally rises when investors fear global risk, fell by 1.1% to $1,334.8 an ounce on Tuesday.

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BBC Business Live

  1.  
    TESCO PROFITS 10:10:

    Barclays Capital analyst James Anstead says although there are few details at present as to why Tesco's profits need to be restated "there is a clear implication that Tesco's previous full year trading profit guidance of £2.4bn to £2.5bn needs to be reduced. He adds: "We cannot necessarily assume that the maximum change required is £250m."

     
  2.  
    ENTREPRENEURIAL SPIRIT 09:57:

    An 18-year-old "whizzkid" with a love for the board game Monopoly is preparing an audacious bid to lead one of UK's largest retailers, according to the Daily Mail. Harris Aslam already sits on the board of Nisa Retail. He has apparently has told the group's chairman he intends to stand for election as its next chief executive.

     
  3.  
    TESCO PROFITS 09:46:

    Marks and Spencer's chief financial officer (CFO) Alan Stewart was announced as the new CFO of Tesco in July but he is still on gardening leave and is not due to join Tesco until December. Laurie McIlwee resigned as CFO in April but continued in post until just over a week ago. Over the last week there has been no CFO in the Tesco head office, the company has confirmed.

     
  4.  
    TESCO PROFITS 09:39:

    Tesco says it has informed the financial regulator, the Financial Conduct Authority (FCA), about its investigation into the reporting of its profits.

     
  5.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Tesco won't confirm my revelation that Chris Bush has stepped aside. But will confirm that Robin Terrell is now doing his job!"

     
  6.  
    TESCO PROFITS 09:31:

    Tesco chairman Richard Broadbent says the retailer's investigation is focusing on the reporting of payments made to Tesco from its suppliers. It seems to be an issue of the timing of payments, rather than a "hole" in the accounts.

     
  7.  
    TESCO PROFITS 09:18:

    Dave Lewis, Tesco chief executive, will not confirm that Chris Bush the managing director is one of the four executives suspended as part of its investigation into its profits reporting. He is speaking to journalists on a conference call.

     
  8.  
    MARKET UPDATE 09:16:

    Aside from Tesco the FTSE 100 index is lower by 0.66% at 6,792 just over an hour into the trading day. Tesco is perhaps unsurprisingly the biggest faller. Meanwhile, engineering firm Petrofac is the biggest riser, up 1.72% to 1066p.

     
  9.  
    TESCO SHARES 09:11:

    Tesco's share price is beginning to stabilise a little. Having fallen 11.3% on the open to 203.5p, Tesco shares are currently trading 7.99% lower at 211.25p

     
  10.  
    TESCO PROFITS 09:01: BBC Radio 4

    James Bevan, chief investment officer at CCLA Investment Management, tells Today the profit warning from Tesco could amount to falsifying accounts. "They have decided to account for profits arising in future periods in the current period, and deferred costs that otherwise should have been recognised. That's really serious."

     
  11.  
    TESCO PROFITS 08:57: Via Email

    Richard Hunter, head of equities at Hargreaves Lansdown, says Tesco's profit warning "does not come close to jeopardising overall profitability" at the supermarket, and the market will be happy that at least the bad news is out in the open and being dealt with.

     
  12.  
    UK ECONOMY 08:44: BBC Breakfast
    Jeremy Cook

    Breakfast's Steph McGovern is down in London in the financial district talking to Jeremy Cook, chief economist at World First foreign exchange, who says we should be focusing on how strong the UK economy is following the Scottish referendum. Unemployment is down, GDP is growing - "all very very good news".

     
  13.  
    TESCO PROFITS Via Twitter

    Sean Farrell on the Guardian's City Desk tweets: "Tesco CEO Lewis: 'This is not in the ordinary course of events. This has been audited by a big reputable firm.'

     
  14.  
    HEADLINES
  15.  
    TESCO PROFITS 08:35: Radio 5 live

    Four senior Tesco executives including the UK managing director Chris Bush have been suspended, while an investigation into profits reporting is carried out, Adam Parsons says on Radio 5 live. The share price has recovered a bit but is still down more than 9%.

     
  16.  
    MINIMUM WAGE 08:21: Radio 5 live

    Shane Brennan from the Association of Convenience Stores says the minimum wage is becoming a "political football" between the main political parties, and warns a rise could hit employees negatively. "When the minimum wage goes up, small retailers cut back on the hours they offer staff," he tells Radio 5 live.

     
  17.  
    CHILD BENEFIT 08:18: Radio 5 live

    Ed Balls is talking about the minimum wage on 5 live Breakfast, but he keeps falling off the air. He was half way through explaining how the Labour party wants to extend the child benefit cap - one of those "difficult decisions" necessary to "balance the books".

     
  18.  
    TESCO SHARES 08:14:

    Tesco's shares opened down 11.3% at 203.5p - that's its lowest price since May 2003 - more than a decade ago.

     
  19.  
    TESCO SHARES 08:09: Breaking News

    Tesco's share price falls by more than 10% in the first few minutes of trading in London.

     
  20.  
    MOSS BROS PROFITS 08:04:

    Menswear retailer Moss Bros has reported a pre-tax profit of £1.95m for the six months to July. That's slightly lower than their previous guidance and reflects the number of stores that were closed for refit in the first half of this year, the company said. Like for like sales were 6.4% higher.

     
  21.  
    TESCO PROFITS Via Twitter Robert Peston Economics editor

    tweets: "Tesco! Oh my giddy aunt. Never thought it would come to this http://www.investegate.co.uk/tesco-plc--tsco-/rns/trading-update/201409220700142186S/ …

     
  22.  
    ALIBABA 07:55:
    Alibaba

    The Financial Times reports that Alibaba, the Chinese ecommerce group, has boosted the value of its IPO to $25bn (£15bn) by selling extra shares. That makes it the biggest IPO in history. Huge investor demand saw the company's share price surge 38% on its debut on the New York Stock Exchange on Friday.

     
  23.  
    TESCO PROFITS Via Twitter

    Richard Hunter from stockbrokers Hargreaves Lansdown tweets: "Profit warning on a profit warning for #Tesco likely to put further pressure on a share price already down 39% over the last year"

     
  24.  
    STOCK MARKET FLOAT 07:47:

    Other news from the stock market this morning: British bank Aldermore says it will float on the London Stock Exchange in October, aiming to raise £75m. Aldermore focuses on lending to small and medium-sized businesses and homeowners.

     
  25.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Dave Lewis initiated inquiry over weekend. Am told Philip Clarke has officially left Tesco, but remains available to talk to investigation."

     
  26.  
    PHONES 4U RESCUE 07:36:
    The Phones 4U shop sign.

    Phone network EE is to buy 58 Phones 4U stores - safeguarding 359 jobs - in a deal with administrator PricewaterhouseCoopers. The phone network was known to have entered negotiations over the weekend. On Friday Vodafone agreed to take over 140 Phones 4U shops.

     
  27.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Tesco were due to report Interims next week. That has now been cancelled."

     
  28.  
    LABOUR CONFERENCE 07:26: BBC Radio 4

    Labour shadow business secretary Chuka Umanna tells Today Labour is pro-business, but says: "What we have been clear about is we can't go back to business as usual and the kind of fast buck culture we saw in some parts of the economy that helped contribute to the 2008/09 crash."

     
  29.  
    TESCO PROFITS Via Twitter

    City grandee David Buik tweets: "It never rains but it pours dear old Tesco. It appears profits have been over-stated by £250 mn - shares could be down 5% at the opening."

     
  30.  
    TESCO PROFITS 07:15:
    A group of Tesco shopping trolleys

    "We have uncovered a serious issue and have responded accordingly," said Dave Lewis, who took over as the boss of Tesco last month. "The chairman and I have acted quickly to establish a comprehensive independent investigation. The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."

     
  31.  
    TESCO PROFITS 07:11: Breaking News

    Tesco has released a statement saying it over-stated its expected profit for the six months to 23 August. In a trading statement on 29 August it said it expected half-year profits to be £1.1bn. It has now revised this down by £250m.

     
  32.  
    LISTEN AGAIN Via Twitter Adam Parsons Business Correspondent

    tweets: The #WUTM podcast. All yours: bbc.co.uk/podcasts/serie…

     
  33.  
    AIR FRANCE 07:03:
    Air France planes

    Pilots at Air France are looking ahead to a second week on strike this morning. France's transport minister Alain Vidalies says the fate of Air France is at stake in the dispute. Pilots are angry that the airline is expanding its budget carrier, which pays pilots less.

     
  34.  
    LABOUR ANTI-BUSINESS? 06:55: BBC Radio 4

    Lord Jones tells Today that Labour has not given business the credit it deserves. "Without the wealth that business creates you have no public sector, you have no taxation, you don't have one job in the country. That's how important business is," he says.

     
  35.  
    LABOUR ANTI-BUSINESS? 06:51: BBC Radio 4
    Digby Jones

    Lord Digby Jones, former head of the CBI and member of the last Labour government tells Today that Labour is casting doubt on its support for the UK business community. "Whatever the current shadow cabinet say - let's nationalise the banks, let's have a social market in energy, lets increase business taxes, whatever it may be - they are showing by their actions that they actually don't get it," he says.

     
  36.  
    DEVOLUTION 06:42: Radio 5 live

    Wake Up to Money has been discussing the prospects for more devolution across the UK in the wake of the "No" vote in Scotland. Tony Travers from the London School of Economics says the UK is one of the most centralised democracies in the world - 95% of tax revenues go straight to the exchequer.

     
  37.  
    MINIMUM WAGE 06:35: BBC Radio 4

    Is Labour leader Ed Miliband's pledge to raise the minimum wage to £8 per hour by 2020 anti-business?Simon Walker, head of the Institute of Directors, tells the Today programme he shares many of the Labour party's concerns - on energy prices, zero-hours contracts and wages. "But... we don't agree with Labour's instinct to legislate or regulate on these matters," he says.

     
  38.  
    MARKETS 06:29: BBC Breakfast
    Breakfast

    Breakfast's Steph McGovern is in the City in London before dawn this morning, talking to analysts and market traders about what's moving the markets after the "No" vote in Scotland last week. She'll be talking to a currency trader later to find out what's going to happen to the pound.

     
  39.  
    MINIMUM WAGE 06:18:

    Labour's leader Ed Miliband says Labour will put the minimum wage up to £8 an hour if they win the election next year - up from the £6.50 is due to rise to this October. The unions say that's not enough, and want £10 an hour, while the CBI warns any rise will "put jobs at risk".

     
  40.  
    LABOUR CONFERENCE 06:12:
    Labour shadow  chancellor Ed Balls

    Ed Balls is expected to say that Labour will reinstate the 50 top rate of tax in his speech to the party conference later today. That's not necessarily news. But Labour haven't been completely clear on whether they would reinstate the 50p tax band until now. The inclusion of the proposal essentially amounts to an election promise eight months out from the general election.

     
  41.  
    Phones 4U 06:02: Radio 5 live

    EE has confirmed it's looking into buy a few of those Phones 4 U shops now on the market. Judy Palmer from Begbies Traynor defends EE and Vodafone, the operators accused of helping to put the mobile retailer out of business, on Wake Up to Money calling their actions "commercial hardball".

     
  42.  
    06:01: Edwin Lane Business reporter, BBC News

    Hello all. We're also getting the latest on the fate of Phones 4U, after it went into administration last week. Get in touch with us on bizlivepage@bbc.co.uk or tweet us @BBCBusiness.

     
  43.  
    0600: Matthew West Business Reporter

    Morning folks. We start the day with news that luxury shoe brand Jimmy Choo is looking at a stock market float in London, there are also half year results from Moss Bros. The Labour party conference goes into its second full day with a speech from shadow chancellor Ed Balls. It's his last conference speech before the election so we'll bring you any nuggets from that too. Stay with us.

     

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