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.  
    08:49: TESCO EARNINGS

    Tesco has also warned on its full year profits outlook. It says it is "reviewing all opportunities that exist within the group to generate value and create headroom. Full year profitability could therefore be further impacted by actions we choose to take." In other words, don't expect a turnaround over the next six months.

     
  2.  
    08:35: FOXTONS FALL
    estate agent

    Estate agents Foxtons' shares have fallen 18% after it said its earnings would fall due to a sharp drop in demand in the London property market. Foxtons said its third quarter sales fell 3% to £39.3m and said political and economic uncertainty in Britain and more restrictive rules on mortgage lending were the cause. This is the Foxtons who were told in 2009 their "renewal" commission from a landlord if a tenant stayed on past the initial tenancy period - even if the agency had played no further part in arranging or managing the extended tenancy - was unfair.

     
  3.  
    08:21: TESCO EARNINGS BBC Radio 4

    Brian Roberts of Kantar Retail is talking Tesco on the Today programme. He says some retailers -Aldi - have a far simpler business model than Tesco. They buy things to sell to their customers. But most supermarkets make more money through buying. And Tesco has been the biggest sinner here, he says by "extracting its profitability from suppliers" over the last few years as opposed to its customers. That's as a result of these supplier rebates we've been hearing about recently, which mean supermarkets get a discount on the goods they buy from suppliers if they hit certain sales targets. Hope that's clear.

     
  4.  
    08:07: TESCO EARNINGS Radio 5 live

    Jane Clark, author of the blog Frugal Queen has been talking Tesco on 5 live. "I do find it a bit pricey... they are more expensive than my local fruit and veg shop for greengrocery." Tesco "will have to price match with the discounters and be aware of how little money people have." She says they need to ditch buy one get one free on junk food because people want cheaper basics.

     
  5.  
    08:06: TESCO EARNINGS
    Tesco share graph

    Tesco shareholders have reacted badly to its interim results. The supermarket's shares have opened 6.5% lower to 171p.

     
  6.  
    07:54: TESCO EARNINGS

    Tesco's rather dramatic fall in statutory pre-tax profits is the result of one-off items totalling £527m, including an adjustment relating to "prior years' commercial income" of £145m, stock write-downs of £63m, impairment charges of £136m in the UK and Europe, restructuring costs of £41m, and another £41m retrospective charge relating to a Valuation Office ruling on ATM rates plus a £27m increase in the Bank's provision for customer redress.

     
  7.  
    07:44: REED ELSEVIER

    Media firm Reed Elsevier said underlying revenue growth for the first nine months of the year was 4%. It bought 25 firms for £294m.

     
  8.  
    TESCO EARNINGS Via Email

    Winston Collinge from Carlisle writes in: "Notwithstanding the upsurge of Aldi and Lidl, isn't it just the case that there is overcapacity in the food retailer sector and they are now fighting like dogs?"

     
  9.  
    07:31: DEBENHAMS EARNINGS
    Debenhams

    And now for something completely different. Department store Debenhams says like-for-like sales rose 1.0% for the year to 30 August. Profit shrank 24% to £105.8m as profit margins narrowed.

     
  10.  
    07:21: TESCO EARNINGS

    There's an update to the Deloitte investigation into Tesco's overstatement of its expected half year profit too. The amount overstated is up - a bit - and it's no longer a singular overstatement. Tesco now says the overstatement amounted to £263m in total. The impact on its trading profit for the first half of this year is £118m. But there is a further £70m overstatement from the previous financial year and £75m from before the 2013/14 financial year. Both of those have been treated as one-off items within this set of results.

     
  11.  
    07:12: TESCO EARNINGS

    Tesco chairman, Sir Richard Broadbent, has also announced his resignation although there's no timetable yet. He says: "My decision reflects the important principle of accountability on behalf of the Board and will support the company to draw a line under the past as it enters the next phase of its development." He has come under pressure to stand down since Tesco revealed that it had mis-stated its profit outlook for the first half of 2014/15 in September.

     
  12.  
    07:08: TESCO EARNINGS

    ... are out. UK like-for-like sales excluding petrol are down 4.6%. Statutory pre-tax profits are down 91.9% to £112m. The underlying profit figure for the period (26 weeks to 23 August) is down 46.6% on the same period a year earlier to £783m.

     
  13.  
    06:55: LLOYDS JOB LOSSES BBC Radio 4

    Mr Hahn tells Today the UK banking industry needs to do more in the way of community banks. He adds banks are beginning to link up with supermarkets as a way of doing this but local communities are likely to suffer as more bank branches close. He says it has been "an error" of government policy that "we keep thinking in terms of challenger banks". What the UK banking industry really needs to think much more about is community banking and how to provide banking services to small communities, he adds.

     
  14.  
    06:41: LLOYDS JOB LOSSES BBC Radio 4
    A Lloyds Bank logo

    The 9,000 job losses at Lloyds Banking Group amount to about 10% of its total workforce. It is also expected to announce a series of branch closures. Cass Business School banking analyst Peter Hahn tells Today the way we buy things from banks has changed. That's putting pressure on bank branches. He says we'll see "fewer but better bank branches". "We'll see them more principally located, so big cities and market [towns]," he says. Mr Hahn suggests they will be slicker operations, more sales-oriented, but not used as much for "regular transactions."

     
  15.  
    06:28: GLAXOSMITHKLINE Radio 5 live

    Newspapers are reporting GlaxoSmithKline may spin off its HIV business. Holly Cook, managing editor of Morningstar's website for UK investors tells 5 liveWake Up to MoneyGSK's respiratory drug, advair is under "intense competition" and a sale through a public offer "will allow GSK to streamline itself" as its HIV drugs see "huge demand".

     
  16.  
    06:15: TESCO EARNINGS Radio 5 live

    "Like-for-like sales is the first number analysts will look at, followed by the accounting problems," says Holly Cook of Morningstar on Wake Up to Money. The online business may have done well while the supermarkets will be a "weak spot." Looking at Tesco, "a lot of customers find it a bit overwhelming and you are bombarded by information and you can't find what you want."

     
  17.  
    06:07: TESCO EARNINGS Radio 5 live
    A Tesco trolley

    "When the CEO is on gardening leave the chairman should step up and that's not happened," says Mr Roberts on Wake Up to Money, talking about the performance of Tesco chairman Sir Richard Broadbent. The supermarket discovered a £250m profit black hole. "I'd be remarkably surprised if it's limited to a 6-month period," he adds.

     
  18.  
    06:01: TESCO EARNINGS Radio 5 live

    Brian Roberts of Kantar Retail is on Wake Up to Money talking about Tesco's results, out today. "There's lots of hoops you have to jump through" as a shopper at Tesco, he says. Buy one get one free, the loyalty card, driving a car and buying the petrol. "With Aldi you just have to turn up... Tesco used to have the shopper at the centre of the business and now they've replaced the shopper with the shareholder."

     
  19.  
    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email bizlivepage@bbc.co.uk and twitter @BBCBusiness

     
  20.  
    06:00: Matthew West Business reporter

    Morning all. Now we could try and pretend that there is other news going on (and in fairness there is some) but let's face it, the focus today is all going to be on Tesco's half year results. We'll bring you them as soon as they drop, plus all the reaction and the rest of the day's news as it happens.

     

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