Ukraine crisis: worldwide markets bounce
Russia’s state gas company have said they will raise gas prices for the Ukraine as tensions between the two countries build 
In Russia, where more than 10pc was wiped off the stock market yesterday, equities have opened in positive territory. The rouble-dominated Micex has ciimbed 2.99pc while the dollar-dominated RTS is up 3pc.
Photo: David Rose for The Agencies
Latest
Ex Microsoft chief exec: you don’t have to be cool to succeed
13.03 Recently departed Microsoft chief executive Steve Ballmer is in typically passionate mood at a speech to students at Oxford University.
He as admitted that “there are things we could have done better in the last 10 years… we would have a stronger position in the phone market if I could redo the last 10 years”. However, he says Microsoft is determined to be at the front of the next wave of technology.
“In 10 years, do you really think we’re going to use devices that look like the devices we use today? Devices will continue to change so do you give up or do you get ready for the next wave of change “
He admits that Apple is “quote cool unquote”, but that “you don’t have to be cool” to succeed. He says: “If Microsoft can be like brand Oxford or brand Harvard, despite being around forever that’s a good goal”
Twitter: Tom Warren – “I am not an engineer. I have never written a line of production code in my life.” – Steve Ballmer, former Microsoft CEO.
UK economy ‘will not be majorly affected by Ukraine crisis’
12.41 Capital Economics, a macroeconomic research company, believes the Ukraine crisis isn’t a worry for the UK economy.
The UK economy should not feel any major adverse effects from the crisis in Ukraine since trade and financial exposures to it and Russia are small. The biggest threat is from higher commodity prices, but only a major and sustained rise would cause UK inflation to rise much above the 2% target this year.
Unsurprisingly, the UK’s direct trade links with Ukraine are relatively insignificant. UK goods and services exports to Ukraine accounted for just 0.2% of the total in 2012. (By comparison, exports to Germany account for about 9%.) Even exports to Russia amounted to just 1.5% of the total, so a downturn there would not spell disaster.
Similarly, UK banks’ exposure to Ukrainian and Russian debt is tiny, accounting for just 0.01% and 0.5% of their total foreign claims in the third quarter of 2013 respectively.
Gazprom to raise Ukraine gas prices
12.15 Gazprom will raise gas prices for Ukraine from the start of next month because the country couldn’t pay its debt for February, the Russian gas company chief executive Alexei Miller said.
Alexei Miller also said Gazprom could offer Ukraine a loan of $ 2-3bn to pay off the country’s debt of more than $ 1.5bn after Ukraine told the state company it was unable to pay in full for gas deliveries in February, according to Interfax.
Russian president Vladimir Putin gave Ukraine a discount on Russian gas supplies, but the price must be renegotiated every three months and has not been renewed.
They failed to pay of the debt, I think it’s $ 1.5bn as of today, and if they don’t pay for February it’s going to be US$ 2bn. So if you don’t pay, then let’s go back to regular prices. This makes perfect commercial sense. This has nothing to do with situation in Ukraine. We gave them money, they failed to deliver” , Putin said in his televised news conference.
India trade minister accuses US of protectionism
12.07 India’s trade minister accused the United States of excessive trade protectionism, launching a broadside that coincided with the visit of a top US official to patch up a stormy bilateral friendship.
“There are issues which India has raised where we feel there is very high and unacceptable protectionism,” he told reporters in New Delhi. He also said Washington made it too hard for Indian nationals to obtain US visas.
So Russia is going to abandon the dollar as a reserve currency? Good luck
11.54 Jeremy Warner doesn’t hold much stock with threats that RUssia will abandon the dollar as a reserve currency.
The dollar remains overwhelmingly the currency of choice for international transactions, and is the middle currency in virtually all transactions. The US dollar is also the pricing currency for virtually all commodity transactions, including crucially, oil. Repeated attempts to set up alternative pricing arrangements have all come to nothing.
Then finally, more than 60 per cent of the world’s central bank foreign currency reserves are held in dollars. The euro, the next biggest reserve currency, comes nowhere close. This is not about to change. In other words, Russian threats are as vacuous as Western ones. Hey ho”, he writes in a blog .
Everyone needs some dollar
Putin: market reaction is ‘temporary and tactical’
11.36 Russia’s President Vladimir Putin has said the current instability in the financial markets is a temporary and tactical situation.
He also said any sanctions would backfire and blamed some of the turbulence on US policies, namely the Fed tapering reduction.
Meanwhile, Russia’s shares are surging up, with the MICEX up 5pc and Russian RTS up 5.77pc. So not quite all of yesterday’s losses, but half way there.
Twitter: The Associated Press – BREAKING: Putin: Sanctions against Russia will backfire on the West.
Twitter: The Associated Press – BREAKING: Putin says he hopes Russia won’t have to use force in eastern Ukraine.
Twitter: The Associated Press – BREAKING: Russia to cancel the discount for natural gas supplies to Ukraine.
President Vladimir Putin also said Russia intends to work with Western states using the International Monetary Fund as a potential source of economic aid to Ukraine.
Russia began the bailout by buying $ 3bn worth of Ukrainian Eurobonds later that month, but stalled on releasing a second tranche as opposition protesters got the upper hand and pushed President Viktor Yanukovich from power.
“In principle, we would be ready to consider further steps to release more tranches … but our Western partners are asking us not to do this,” Putin told a news conference in his first public comments on Ukraine in over a week.
“They are asking us to work together in the framework of the IMF in order to persuade the government of Ukraine, the Ukrainian authorities, to conduct reforms needed to revive the economy,” he said. “We intend to keep working in this channel.”
Ukraine has asked the IMF for at least $ 15 billion to avert bankruptcy.
11.30 Maybe the soggy effect of British weather on UK construction PMI figures isn’t a bad thing…
Michael Conroy Harris, construction expert at global law firm Eversheds, said:
Whenever the weather is described as ‘the worst since records began’ it follows that the construction industry will be significantly impacted. There’s no doubt that the flooding will have a short to midterm impact on the industry, but is it necessarily a bad thing? The recovery in the industry has been a long time coming and all the more welcome for that but the last thing we need now is overheating. Maybe, just maybe, the dampening effect of the weather will have a silver lining in that the industry can go on to enjoy sustainable growth as opposed to a mere temporary boost.
11.00 The market reaction to Ukraine tensions may have cooled, but we may not be out of the woods yet!
David Madden, market analyst at IG said:
In mid-morning trading the FTSE 100 is up 80 points as tensions cool between Ukraine and Russia. Confidence in equity markets has been restored as the stand off between Ukraine and Russia is no longer on red alert. The prospect of war is dwindling as Russian troops have been recalled to their bases – but we are not out of the woods yet. The drop in equity markets yesterday, and correction back today, highlights how volatile an issue this is. We may have pulled back most of yesterday’s losses but the rally is fragile.
“Gold has pushed back from its four month high as profit taking following yesterday’s surge and renewed interest in risky assets takes hold. While above the $ 1325/oz level, there remains a bias to the upside and while there is any remaining uncertainty one can expect the safe haven of gold to remain somewhat topical in the near term. Oil prices have also broken lower as fears of disruption in wholesale gas supplies subside. A forecast from Moody’s Ratings Agency today indicated that the outlook for oil this year was stable but expected to remain above $ 100/bbl.
“In the US we are expecting the Dow Jones to open 107 points higher at 16,275 as markets rebound from yesterday’s collapse.”
10.47 With tension over Ukraine easing, investors are on the hunt for bargains, helping the FTSE 100 rebound 1pc. Ishaq Siddiqi at ETX Capital said:
This morning, Russian stocks are rallying while the Rouble is on the rebound on news of Russian troops being sent back to their bases; a sign that military action is not imminent although cannot be ruled out between Russian and Ukrainian forces. This has led to risk appetite in Europe to improve too, further helped by a firmer an Asian session although market sentiment remains fragile and anxious at best with traders transfixed with developments in the Ukraine.
The question of economic collapse for Ukraine continues to weigh on sentiment as the country is now in desperate need for funding to service debts – at the moment, the IMF is in Keiv, negotiating a deal but this will undoubtedly have harsh conditions which are likely to devalue the tightly controlled Hryvnia currency. Looking ahead, other than Ukraine still being the major market focus, attention falls on Europe for PPI data and PMI construction data out of the UK.
US economy ‘to grow 3pc’
10.25 Ben Barnanke, former chairman of the Federal Reserve, believes the US economy is seeing some progress.
Speaking in Abu Dhabi at the Global financial markets forum, he said there’s good reason to think US GDP will grow around 3pc, US household wealth has recovered from crisis and the housing market is showing signs of recovery.
He also said the Fed needs to increase focus on financial stability.
10.21 Ukraine prime minister, Arseniy Yatsenyuk, is to meet EU leaders in Brussels on Thursday and Russian President Vladimir Putin is due to make a statement shortly, which will be streamed here .
Twitter: Herman Van Rompuy – EU HoSG will discuss situation in #Ukraine with PM Yatsenyuk in Brussels Thursday prior to extraordinary summit #euco @Yatsenyuk_AP
10.16 Jonathan Pryor, head of FX dealing at Investec Corporate and Institutional Treasury, said the dollar has not received expected support as the foreign exchange market reacts to events in Ukraine.
It wasn’t only Ukraine that went into defensive mode yesterday as markets battened down the hatches and opted for safe haven currencies, with particularly the yen and Swiss franc enjoying inflows as a result of heightened tensions about Russia’s next move. So far the dollar has not received quite the support that we may expect from a risk-off move but if we see an unwelcomed escalation of the crisis the dollar could mount a charge against a large basket of currencies.
Weather dampens UK construction growth
09.46 Britain’s health construction growth eased last month, hurt by heavy rain and floods which affected house-building.
The Markit/CIPS construction PMI slipped to 62.6 in February. The figure was below expectations of 63 and down from 64.6 in January – which was its highest level since August 2007.
Purchasing managers who took part in the survey said the adverse weather hit house-building in particular which remained strong but grew at its slowest pace in four months.
By contrast, civil engineering activity saw its strongest month since April 1997, helped by higher spending by local authorities which in some cases was in response to the rain.
Job creation was at its highest in three months as 59pc of construction companies expected a rise in output over the year, compared with only 10pc predicting a fall.
Oil prices fall
09.25 Brent crude oil prices fell for the first time in three days amid speculation that supply concerns may be exaggerated.
US futures fell up to 1.3pc as Russian troops were ordered back from the Leningrad region.
Trade war with Russia ‘would be Lehman Brothers 2’
09.12 Alistair Heath, editor of City AM, has written about how building tensions with Russia have left us stuck.
Iranian-style sanctions on Russia would be extremely painful for all concerned. It is unclear who would blink first: the Russians, who would face economic implosion, or Europe, which would be tipped back into a vicious recession. Global banks could go bust if they suddenly couldn’t trade with Russian firms anymore, Russia could default on its debt, the price of grain, energy, oil and commodities would rocket and we would face a new Lehman moment. Germany, whose ties with Russia are even closer than London’s, would never risk it, and voters would not tolerate the pain. Some targeted sanctions on specific individuals may help, but could easily backfire. Longer-term solutions include developing shale gas to be less dependent on Russian imports, and hoping that Putinism doesn’t last forever.
08.52 While the FTSE 100 has bounced 1pc in morning trade, Rebecca O’Keeffe, head of investment at broker Interactive Investor, says volatility remains high:
Brinksmanship but no battles yet in the Crimea and Ukraine, with the position this morning less fraught than many had anticipated and equity markets rebounding slightly. However the potential for further escalation is far from over and with market reaction to both news and rumour immediate, volatility remains high. This increased volatility has impacted almost all areas of the market, from equities to bonds and commodities, and whilst it has undoubtedly created a number of buying opportunities, with the political, economic and energy risks so high, investors will need to be careful.
Kremlin threats: Russia could refuse to repay US loans
08.36 A Kremlin aide said that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off any loans to US banks.
Sergei Glazyev, an adviser to the Kremlin who is often used by the authorities to stake out a hardline stance but does not make policy, added that if Washington froze the accounts of Russian businesses and individuals, Moscow would recommend that all holders of US treasuries sell them.
In the instance of sanctions being applied to stated institutions, we will have to declare the impossibility of returning those loans which were given to Russian institutions by U.S. banks.
“We will have to move into other currencies, create our own settlement system.
“We have excellent trade and economic relations with our partners in the east and south and we will find a way to reduce to nothing our financial dependence on the United States but even get out of the sanctions with a big profit to ourselves” , he said to RIA news agency.
08.34 The FTSE is up after yesterday’s slump, climbing 1.23pc to 6790.74.
Dax is up close to 1pc while Cac s up 1.42pc and IBEX has climbed 1.25pc.
City Briefing
08.24 James Titcomb has rounded up some of the morning news in today’s City Briefing email.
What to do about business rates? The survival of the high street is at serious risk because of the “not fit for purpose” system, which should possibly be replaced by something entirely new, a group of MPs says this morning.
The Business, Innovation and Skills Committee has joined calls for a review of the tax, which is currently levied on retailers’ property values and is seen as putting the high street at a disadvantage to internet retailers. The committee’s chairman, Andrew Bailey, labels the system “no longer appropriate in an increasingly online retail world”.
In today’s corporate news, the extent of the ugly 2013 that Serco endured has been laid bare. The outsourcing group, which suffered a series of setbacks last year, says it faces another tough year after profits fell 59.9pc in 2013. The company, which last week signed up Aggreko boss Richard Soames, says the near-term outlook remains “challenging” and it expects revenues and margins to fall this year.
It’s also the first set of annual results for Glencore Xstrata since the merger that created the global commodities giant, and it has beaten expectations. The group’s adjusted earnings are steady at $ 13bn, better than expected, and Glencore boss Ivan Glasenberg says the $ 2.4bn in cost savings that came from the merger will be fully realised this year.
Moneysupermarket.com’s 26pc rise in profits, Virgin Money coming out of the red and Alex Salmond’s speech later today are also mentioned. Sign up for the email here .
China stocks fall for first time in five days
08.09 China’s stocks fell, halting the becnhmark index’s longest stretch of gains in three weeks, before the start of an annual policy-setting meeting tomorrow.
China Citic Bank slumped 2pc to drag down smaller lenders as money-market rates jumped the most in six weeks.
The Shanghai Composite Index slipped 0.2pc to 2,071.47 at the close, halting a gain of 2pc in the previous four days. Investors will be watching the meeting of the National People’s Congress for clues to the next steps to fix local-government finances, charge market prices for natural resources, rein in shadow-banking risks, free up deposit rates and open up state businesses to private investment.
“The market is waiting for signals that will come from the NPC such as the economic-growth target and policies on real estate,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. “Russia and Ukraine have some implications, but not that big. The decline is due to China’s internal problems like slowing growth.”
Russia’s shares are up
07.53 Russia’s shares are gaining this morning, with MICEX up 3.01pc and Russian RTS up 3.35pc.
Russian troops have been ordered back to their bases, giving hope there will be a peacful resolution. Europe’s shares are also expected to open up after yesterday’s tumble.
Europe’s gas stockpiles will last 45 days
07.42 Europe’s mildest winter since 2007 has left the region with enough natural gas in storage to cover any future disruption in flows from Ukraine for about 45 days.
European inventories were 49pc full as of March 2, according to Gas Infrastructure Europe, a lobby group of pipeline operators in Brussels. That’s equal to about 1 1/2 months of imports from pipelines running through Ukraine, said Oswald Clint, a senior analyst at Sanford C. Bernstein & Co.
“It isn’t very cold, there is gas in storage, I wouldn’t panic,” said Karen Sund, founder of Sund Energy AS, which has advised the International Energy Agency and Centrica Plc on gas markets.
Asian shares up on hopes of peaceful Ukraine resolution
07.35 Asian shares turned higher and the safe-haven yen drooped after Russia’s president ordered troops in military exercises in central and western Russia to return to base, raising hopes that a peaceful solution might be reached.
Tokyo rose 0.47pc, and in the afternoon Hong Kong was up to 0.73pc higher.
But Shanghai shed 0.18pc and Seoul gave up 0.54pc.
The immediate and likely largest impact from the risk-off sentiment due to the crisis in the Ukraine may have already passed,” Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, told Dow Jones Newswires.
Global stock markets ease after day of turmoil
06.43 Early signs are that global equity markets will enjoy a small bounce back today as traders buy on the lows following yesterday’s tumult – though they’re unlikely to regain all of yesterday’s losses as geopolitical tensions are still running high.
Tokyo’s Nikkei cimbed 0.47pc overnight, as traders hunted for bargains – though this was not enough to claw back all the losses it suffered on Monday morning, when it lost 1.3pc.
In Russia , where more than 10pc was wiped off the stock market yesterday, equities have opened in positive territory. The rouble-dominated Micex has ciimbed 2.99pc while the dollar-dominated RTS is up 3pc.
A reminder about what happened yesterday:
The FTSE 100 fell 1.49pc
Germany’s Dax tumbled 3.4pc
Paris’s Cac shed 2.7pc
Dow Jones fell 0.94pc
S&P 500 lost 0.74pc
While safe-haven gold climbed 2pc to $ 1,384.8, nearing a four-month high
Ian Williams of Peel Hunt this morning noted that the damage of the Russia-Ukraine tensions on global equity markets might have been exacerbated by the fact that markets have been especially optimistic in recent weeks:
Unanticipated negative geo-political events are more damaging to risk assets when valuations are pricing in all the potential good news. That description could be applied to equity markets that rallied through February against a background of bumpy economic news flow and decidedly mixed earnings news; reviving corporate activity had trumped those concerns.
Hence the vulnerability of index levels to the escalating hostilities between Ukraine and Russia.
Today’s business stories
06.50 Here’s what’s leading our business pages this morning
• Alistair Osborne describes the market turmoil that was unleashed yesterday following escalating tensions between Russia and Ukraine over the weekend
• BP has lost its battle to clamp down on “absurd” payouts to alleged victims of the 2010 Gulf of Mexico oil spill , after an appeals court said it must restart payments from its $ 9.2bn compensation fund, reports Katherine Rushton .
• Szu Ping Chan writes that Mario Draghi, president of the European Central Bank, has warned that low inflation poses a threat to the eurozone and could become entrenched.
Good morning
06.45 Good morning and welcome to our daily business and markets live blog, your one stop shop for all the breaking business stories of the day.