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.

More on This Story

More Business stories

RSS

BBC Business Live

  1.  
    CENTRICA PROFITS 09:04: BBC Radio 4

    Centrica's outgoing boss, Sam Laidlaw, has been telling Today the company's earnings were hit by two weather-related phenomena: "We had warmer weather in the UK which meant that actually our average customers' consumption of gas was down 24%. We actually also simultaneously had very cold weather in the US - the polar vortex - which resulted in generating companies charging us with a lot of additional ancillary costs." Nicely put.

     
  2.  
    ROLLS ROYCE PROFITS 08:54:
    A crew member works on the Rolls Royce engine

    Ah the regular battle between underlying and statutory pre-tax profits continues. See if you can get your heads around this. Rolls Royce has reported a 1,000% - yup 1,000% - rise in its statutory pre-tax profits to £717m in the six months to the end of June compared with a loss of £527m a year earlier. But the underlying figure shows a 20% fall in profits to £644m from £804m the year before.

     
  3.  
    MARKET UPDATE 08:39:

    European markets have opened mixed as investors attempt to digest the glut of corporate results out today. The biggest rise on the FTSE 100 in early trade is oil and gas firm BP Group - not to be confused with British Gas - up 2.67% to 1212.00p.

    • The FTSE 100 is higher by 0.34% to 6796.48
    • Germanys Dax is lower by 0.17% to 9577.32
    • France's Cac-40 is up 0.52% to 4334.64
     
  4.  
    HEADLINES
  5.  
    SONY RESULTS 08:26:
    A man plays a video game on Sony's PlayStation 4 console

    Its not just major UK results that are whooshing out at speed this morning. After Samsung's figures, here's Far East fellow Sony's. The company said it made $261m (£367m) in the past three months, thanks to strong sales of its PlayStation 4 console. The weak yen, which makes its products cheaper for outsiders, also helped. But not enough, it still expects to make a full-year loss.

     
  6.  
    COMMONWEALTH AUCTION 08:18:
    Giant Tunnocks

    The diet has been a most austere one this morning. Time for something pretty, Who could take against a Tunnock's tea cake? (Other cakes are available, says the BBC). The giant ones used to such arresting effect at the Commonwealth Games' opening ceremony are being auctioned today.

     
  7.  
    BAE SYSTEMS 08:09:
    A F-35B Lightning II jet landing vertically on aircraft carrier HMS Queen Elizabeth.

    BAE Systems, which is Europe's biggest defence contractor, has reported a 7% fall in six month profits. The reason? Lower military spending by major customer the US. Half-year earnings were £802m. BAE warned earlier this year that earnings would by between 5-10% down on last year because of US defence spending cuts. Or defense spending, as it would say.

     
  8.  
    TSB PROFITS 08:05:

    TSB says costs rose by £62m in the last six month. That's in part because the bank no longer benefits from the economies of scale that Lloyds Bank gave it. That said, it won 9.2% of new or switched current accounts and is managing to maintain its market share. Lloyds still owns 65% of TSB but must get rid of its remaining shareholding under an agreement with the EU Commission by the end of 2015.

     
  9.  
    TSB PROFITS 07:55:

    Back to TSB for a moment. The figure that TSB would prefer investors paid more attention to (because they believe it is more reaslistic) is the near 17% fall in pre-tax profits to £78.6m in the past six months. Part of the problem with assessing TSB's accounts is that the bank only listed on the stock exchange in June, and has only existed as a separate entity from Lloyds Banking Group since 9 September last year.

     
  10.  
    CENTRICA PROFITS 07:50:

    Outgoing boss Sam Laidlaw says profit per household in 2014 expected to be around £40 (£51 before tax), that's 20% lower than in 2013. He also warns that profits won't be as good this year as last.

     
  11.  
    LLOYDS BANK PROFITS 07:46:

    OK.... so those legacy issues in full. Lloyds says these include set aside payments for Payment Protection Insurance (PPI) of £600m and £226m for Lloyds' involvement in the 2012 Libor interest rate rigging scandal and fiddling the repo rate. Lloyds also paid out £1.1bn to investors as part of a scheme that is seeing it buy back fixed income bonds - known as Enhanced Capital Notes - issued in 2009. That was then partly offset by a pensions credit of £710m, the bank says.

     
  12.  
    CENTRICA PROFITS 07:42:

    Prices now: The company says average actual British Gas customer bill is expected to be around £90 lower - 7% - per household in 2014 than last year.

     
  13.  
    LLOYDS BANK PROFITS 07:36:
    A general view of a sign for Lloyds Bank.

    So, good results for TSB on the face of it but not so good for parent Lloyds Banking Group? The bank has reported a big fall in statutory pre-tax profits to £863m in the six months to the end of June from £2.1bn for the same period a year earlier. That's a fall of nearly 60%. It says it took another hit of £1.1bn for what it initially describes as legacy issues - we'll investigate that and tell you what they are momentarily.

     
  14.  
    CENTRICA PROFITS 07:33:

    Energy regulator Ofegm said this week that UK suppliers' profits would grow from 4% to 8% this year, but Centrica said its profit margins would be lower for the year.

     
  15.  
    ASTRA ZENECA RESULTS 07:29:
    AstraZeneca

    The drugs giant recently beat off a $118bn takeover attempt by US giant rival Pfizer. One of the key planks of its defence was its drugs "pipeline" - the products it is creating and hopes will work safely. There's a full report on how that's going here.

     
  16.  
    TSB PROFITS 07:25:
    A woman walks into a branch of TSB bank

    A huge rise in profits at TSB today, although hard to really gauge properly given it was only recently spun off from parent Lloyds Banking Group. It says statutory pre-tax profits in the six month to the end of June rose 164% to £128.5m compared with the six months to the end of December 2013. The bank says the statutory figure when compared to the first six months of 2013 is "of limited benefit".

     
  17.  
    ASTRA ZENECA RESULTS 07:23:

    Drugs giant Astra Zeneca reports second quarter revenue rose 4% to $6.5bn.

     
  18.  
    BALFOUR BEATTY TALKS OFF 07:21:

    Construction company Balfour Beatty has called off talks with Carillion over a possible £3bn merger - just days after the possible deal was first mentioned. There may be interesting share price reaction to that when the markets open in under an hour.

     
  19.  
    SHELL PROFITS 07:19:

    Oil giant Royal Dutch Shell has reported profits doubled in its second quarter to $5.1bn (£3bn) from $2.4bn a year earlier.

     
  20.  
    BNP PARIBAS 07:19:
    BNP PARIBAS

    Giant French bank BNP Paribas reports a loss of 4.3bn euros (£3.4bn), after being whacked by an $8.95bn fine for breaking US sanctions, but BNP said the underlying result was strong and a sign clients had not been scared off. The loss was its first since the 2008 financial crisis.

     
  21.  
    CENTRICA PROFITS 07:18:

    Centrica's headline profit before tax for the six months to end of June is £890m, 40% down on last time.

     
  22.  
    BT PROFITS 07:14:

    Yet another major company reporting today. BT says revenue up 0.5% percent on an underlying basis to £4.4bn and profits flat at £1.4bn. It says there's record demand for superfast broadband and its sports TV service is growing nicely.

     
  23.  
    DIAGEO RESULTS 07:11:

    Drinks giant Diageo reports profits of £2.7bn, down from £3.06bn.

     
  24.  
    CENTRICA PROFITS 07:08:

    Operating profits for its British Gas residential energy supply fell 26%, Centrica says.

     
  25.  
    CENTRICA PROFITS 07:03:

    The energy giant's statutory pre-tax profit for the six months to end of June are £890m, down 40% on last time.

     
  26.  
    CENTRICA PROFITS 06:49: BBC Radio 4

    More from Trevor Sikorski, this time on Centrica, which releases its half-year results shortly. He tells Today: "We are expecting quite a dramatic fall in profits at Centrica and at the moment, their cost base isn't representing that fall in gas prices - essentially because energy companies bulk buy - and so the gas they bought on the wholesale prices won't have fed through yet, but will do later down the line."

     
  27.  
    ENERGY PROFITS 06:49: BBC Radio 4

    Energy company profits are all being driven by "a big reduction in wholesale power prices," Trevor Sikorski, from consultants Energy Aspects, tells Today "When you have a mild winter, you don't use a lot of gas and you don't draw down gas reserves," He adds consumers are as responsible for the state of the market as the energy firms themselves. They "generally don't switch very much" and "we're not sensitive to price changes when they happen, which isn't encouraging competition," he says.

     
  28.  
    SAMSUNG SLOWDOWN 06:41:
    Samsung products

    Smartphone maker Samsung reports its worst quarterly profit in two years as smartphone sales slow. Net profit for the three months to June fell 20% to 6.3 trillion won ($6.1bn).

     
  29.  
    ARGENTINA DEFAULT 06:33: BBC Radio 4

    "The repercussions of a default are coming through and we're going to see Argentina under pressure and inflation running higher and the country falling further into recession," Eimar Day from foreign exchange company Monex Europe tells the Today programme. Argentina is paying 7% on its bonds so why should bondholders be surprised when it defaults? she asks. "These are risky investments and creditors should have been prepared for that." Investors should also allow countries like Argentina to default and get back on their feet, she argues.

     
  30.  
    ENERGY PROFITS 06:24:
    Light bulbs

    Energy regulator Ofgem says the big six energy firms could double their profit margins from 4% to 8% over the coming year, FROM 4% TO 8%. That's the equivalent of making £100 per dual-fuel customer.

     
  31.  
    MANU SHARE SALE 06:16:
    Joel Glazer, left, Bryan Glazer, center, and Tampa Bay Buccaneers team owner and president Malcolm Glazer Malcolm Glazer (right) with his sons Joel and Bryan.

    Another development late last night was news the Glazers sold 5% of their stake in Manchester United - raising about £90m.

     
  32.  
    US ECONOMY 06:09: Radio 5 live

    Eimar Day from foreign exchange company Monex Europe is on Wake Up to Money, looking at Wednesday's news the US economy is growing at 4% a year. She's not convinced it's all that great: "Most of it was rebuilding inventory. There's an armchair labour market in the US. People who have just given up looking for work. The unemployment rate is 6.1%, which gives a glowing image of the US economy, but the economically inactive do not show up in this data."

     
  33.  
    ARGENTINA DEFAULT 06:01: Radio 5 live

    Argentina in default this morning after the collapse of last-minute talks in New York between its government and a group of bond-holders. But the rest of the world need not worry too much, James Lockhart Smith, Latin America analyst for Maplecroft, tells Wake Up to Money: "Negative news for the Argentina economy as a whole but it is unlikely to spread to other countries."

     
  34.  
    06:01: Matthew West Business Reporter

    Morning folks. You can get in touch with us as always via email bizlivepage@bbc.co.uk or you can tweet us @bbcbusiness.

     
  35.  
    06:00: Rebecca Marston Business reporter, BBC News

    Welcome to Thursday's Business Live. It's all about energy this morning as we wait for Centrica's results - as regulator Ofgem says the biggest six firms are set to double their profit margins over the next year.

     

Features

From BBC Capital

Programmes

  • A factory in JapanThe Travel Show Watch

    Factory infatuation – why Japan’s industrial compounds are drawing large crowds at night

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.