Stock markets rally as Ukraine crisis eases a little – business live

Shares push higher after Putin press conference eases some of the tension in Ukraine. Relief rally seen on trading floors around the world. Interfax reports that some Russian troops have returned to base. Flooding hits UK housebuilding…


Powered by article titled “Stock markets rally as Ukraine crisis eases a little – business live” was written by Graeme Wearden, for on Tuesday 4th March 2014 14.26 UTC

On income inequality….

Just stumbled on an interesting blogpost on income inequality, on Columbia Management’s site.

It explains how the failure of lower-paid workers’ pay packets to keep pace with the 5% top earners was an important cause of the 2008 financial crisis, as it drove demand for (then-easy) credit.

You may have known that already. But this post also flags up another important point – the trend began earlier than many might think,with the wealthiest starting to claim an increasingly large slice of the pie from the mid-1980s onwards.

Marie Schofield, chief economist at Columbia, and Toby Nangle, head of multi asset allocation, write:

The roots of the great financial crisis and the slow post-recovery period can be traced to many factors, but a predominant one is the rise in income inequality.

What is not generally known is that this is not a new or recent development—income inequality for both wages and earnings in the U.S. (and other advanced economies) began to rise starting in the 1980s.

The income share of the top 5% in the U.S. income distribution was a fairly constant 20% from 1960 to 1980, with income gains for the top 5% and for the bottom 95% fairly close at near four percent annually. After 1980 the income share of the top 5% rose steadily in the U.S. lifting their income share to 35% by 2012.

Here’s their key points:

  • The rise in income inequality was a root cause of the U.S. financial crisis and the slow post-recovery period.
  • Mediocre income gains for middle income households have contributed to the slow recovery of U.S. consumption and economic growth.
  • As pressure continues to build to address income inequality, we expect the government to lead on this issue and private sector to lag.

More here: The role of income inequality


The US stock market is also tipped to rally around 1% when it opens, in around 20 minutes

Lunchtime round-up: Markets bounce back

World stock markets have bounced back after Russia took some steps to calm the crisis sparked by its military action in Ukraine.

Shares rallied in Moscow, and on European stock markets across the region — although the situation remains tense and fluid.

Scott Meech, co-head of European equities at Union Bancaire Privee (UBP), says:

“It’s still a very worrying situation but seems to have calmed down a bit. That’s why we’re seeing a bit of a recovery.”

The FTSE 100 gained over 100 points at one stage, clawing back all Monday’s losses. And the MICEX index jumped 5%, having tumbled 10% yesterday.

Short-term relief gushed through trading floors after the news broke this morning that the Kremlin had told troops on military exercises in Western Russia, near the Ukraine border, to return to their bases. This calmed fears that they could soon be sent into eastern Ukraine.

At a press conference, President Putin told reporters that his decision to send troops into Crimea would not provoke war.

Putin also said that former Ukranian president Yanukovych had no political future, and claimed that events in Kiev are unconstitutional. Highlights here.

The ruble has risen around 0.8% against the US dollar, to 36.1 ruble to the $1, having hit an alltime low of 36.5 yesterday night.

The recovery came after it emerged that Russian and Ukranian billionaires had lost almost $13bn in Monday’s selloff.

In other news…

Cyprus’s parliament has approved a privatisation plan, as part of its bailout.

Activity in Greece’s manufacturing sector has risen, but workers are still being laid off

Britain’s construction sector was hit by February’s floods, with house-building growth slowing last month.

EC commissioner Michel Barnier has criticised banks who are doing everything possible to avoid Brussels’ clampdown on bonuses.

REMINDER: Our liveblog on Ukraine is here.


Cyprus approves asset sale plan in second vote

Just in, the Cyprus parliament has approved plans to privatise its electricity operator, telecoms provider and port authority as demanded by its lenders, a week after failing to approve the package.

30 MPs voted in favour of the plan, with 26 voting against. It paves the way for future tranches of Cyprus’s bailout to be paid.

Last Thusday, MPs narrowly failed to approve the plan – as striking workers protested in Nicosia.

Reuters has more details:

Cyprus’s parliament approved a roadmap for privatisations on Tuesday, averting a showdown with international lenders insisting on state selloffs as part of a €10 euro ($13.77 billion) bailout.

In a show of hands, 30 lawmakers in the 56-member parliament endorsed a guideline for asset sales just before a deadline for approval expired on March 5.

Parliament’s rejection of an earlier privatisation motion on Feb. 27 risked derailing the bailout accord brokered with the European Union and International Monetary Fund in March 2013.

Democratic Party MPs, who had opposed the plan last week, changed sides and backed it today.

PhD student George Iordanou isn’t impressed:


Barnier: Some banks doing their utmost to dodge bonus rules

Over in Brussels, the EC Commission has issued a rebuke to banks who are trying to dodge its controls on bank bonuses.

Michel Barnier, the EU commissioner for the single market, said he was determined to enforce transparency over bankers pay. He made the comments as the Commission formally adopted curbs on bankers pay, limiting bonuses to 100% of basic salary or 200% if shareholders give their approval.

Last month, HSBC was criticised for giving senior staff new ‘allowances’, worth £32,000 a week to its CEO.

Barnier didn’t name names, but declared that Brussels remains committed to the new rules. He said:

Some banks are doing their utmost to circumvent remuneration rules.

The adoption of these technical standards is an important step towards ensuring that the capital requirement rules on remuneration are applied consistently across the EU. These standards will provide clarity on who new EU rules on bonuses actually apply to, which is key to preventing circumvention.

In addition, the European Banking Authority has a mandate to ensure consistent supervisory practices on remuneration rules among competent authorities. The Commission will remain vigilant to ensure that new rules are applied in full.”

Key event

Here’s our Russia correspondent Shaun Walker on the Putin press conference, which came a few hours after the Kremlin calmed the situation by saying some troops on active duty in Western Russia will return home.

Vladimir Putin is confident Russia‘s take over of the Crimean peninsula – where 16,000 pro-Russian troops are in control of the region’s security and administrative infrastructure – will not descend into war.

During a live address on Russian television, the president insisted that the armed forces of Russia and Ukraine were “brothers in arms”.

“We will not go to war with the Ukrainian people. If we do take military action, it will only be for the protection of the Ukrainian people,”said Putin, adding that there was no scenario in which Russian troops would fire “on women and children”.

The Russian president continued: “Ukraine is not only our closest neighbour it is our fraternal neighbour. Our armed forces are brothers in arms, friends. They know each other personally. I’m sure Ukrainian and Russian military will not be on different sides of the barricades but on the same side. Unity is happening now in the Ukraine, where not a single shot has been fired, except in occasional scuffles.”

Putin denied that the Russian-speaking soldiers occupying key Crimean military sites were Russian special forces, saying they pro-Russian local self-defence forces.

“There are many military uniforms. Go into any local shop and you can find one,” he said.

More here: Russian takeover of Crimea will not descend into war, says Vladimir Putin


The ruble is also gaining more strength, up 1.4% against the US dollar — to 36.08 rubles to the $1.


Putin also had an impact on the Moscow stock market. It has now recovered almost half of Monday’s losses — with the MICEX up over 5%.

So roughly speaking , close to 50% of the $58bn wiped off the value of Russia’s biggest companies has been added so far back today. Or around half a Sochi Olympics….

London stock market recovers all Monday’s losses

The FTSE 100 just hit its highest level of the day, up 105 points or 1.7% at 6813.

That means it has clawed back all Monday’s 101-point losses, and then a bit — as Vladimir Putin made his first press conference since the Crimea crisis began.

These news flashes appeared to be the catalyst for the triple-digit gains – calming concerns over Moscow’s plans.




Reminder – our Ukraine liveblog has full coverage of Putin’s press conference.

Shares are rallying higher as a relaxed-looking Vladimir Putin continues to defend his actions in Crimea (full coverage here).

The FTSE 100 now up 96 points — much higher and it will have recovered all yesterday’s losses (when it fell 101 points).

Putin: Market reaction is ‘temporary and tactical’ state of affairs

Vladimir Putin has described the turmoil in the financial markets as a tactical and temporary state of affairs, during his ongoing press conference on Ukraine (live on Sky News now, and streamed here).

The Russian president also tried to pin some of the blame for the volatility on America, saying that there was already a degree of nervousness in the markets due to certain US policies (ie, the slowing of the Federal Reserve’s huge stimulus programme).

As Haroon Siddique is covering in his liveblog (here), Putin also told reporters that the overthrow of former Ukrainian president Yanukovych is unconstitutional. He said:

The interim president is not legitimate. From the legal perspective it is Mr Yanukovych who is president.

He also planning to host the G8 summit in June – but Western leaders “don’t need to” come if they don’t want to.


Ukraine’s stock market is also surging today, up more than 7% with every share gaining ground.

The UAX had yesterday matched Moscow with an 11% tumble.

Russian market continues to rise

The Russian stock market has continued to romp ahead, with the MICEX up almost 4.5% now.

Airline group Aeroflot is up 6.4% on optimism that Russia will escape economic sanctions, and also reflecting the falling oil price (down around 1% this morning).

European markets are also buoyant.

  • FTSE 100: up 72 points at 6780, +1%
  • German DAX: up 84 points at 9443, +0.9%
  • French CAC: up 59 points at 4350, +1.4%

David Madden of IG reckons confidence has returned to the 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.

Heads-up, Russian president Vladimir Putin is due to appear on TV shortly – it should be streamed here. (and covered in our Ukraine liveblog)

Back on the Ukraine crisis. Jamie McGeever of Reuters has tweeted a handy chart showing which countries are most dependent on Russia’s Gazprom.

10 countries, from Finland to Bulgaria, get at least 80% of their gas supplies from the company, it appears:

This may help explain by European leaders have been more cautious than Washington about hitting Moscow with tough sanctions (see today’s Guardian front page story)

Activity among Britain’s civil engineering firms jumped at the fastest pace since at least April 1997 last month, making it the best performing area of construction, Markit reported.

That suggests that while flooding was bad news for housebuilders (see here), it meant more work for builders who could handle large infrastructure projects.

Some UK building firms are also expecting a boost from the recent flooding, with pressure to avoid a repeat of the disruption suffered by thousands of families.

Markt reports:

Construction firms noted greater spending among local authorities on capital projects and maintenance, in some cases in response to recent flooding and adverse weather conditions.

UK construction sector hit by bad weather

Britain’s builders were hit by the heavy rain and flooding last month, but still recorded decent growth.

Markit’s UK construction PMI, which measures activity across the sector, fell back to 62.6 in February from from 64.6 in January (which was the highest since August 2007).

Any reading over 50 shows the sector expanded.

Building firms reported that the flooding which struck parts of the UK hit efforts to build new homes. House-building growth fell to a four-month low.

But in brighter news, job creation hit a three-month high.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said:

“Bad weather took a bite out of progress in house building, but UK construction remains on a strong growth trajectory in February.

The sector was fuelled by the strongest rise in civil engineering activity in the survey’s history, as an increase in spending was recorded on investment and infrastructure projects in response to recent flooding.

Even though both housing and commercial activity suffered a slide in pace of growth in February, the overall performance was one of continued expansion.


Greek factories still laying people off

Over to Greece, where the battered factory sector continues to shed staff despite a rise in business activity, according to Markit’s monthly healthcheck.

The Greek manufacturing PMI (based on interviews with purchasing managers) rose to a 66-month high of 51.3, up from 51.2 in January. That indicates another rise in activity.

But while new orders and output rose, employment continued to drop.

Markit warned:

The pace of job shedding was in fact slightly faster than one month before.

The survey found “anecdotal evidence” of increased demand for Greek manufactured goods from both the domestic market and foreign clients.

But it also reported that output prices fell at the fastest rate in four months, as deflation continues to grip Greece.

Follow our Ukraine liveblog here

My colleague Haroon Siddique is anchoring the Guardian’s Ukraine crisis liveblog again today – here:

Ukraine crisis: Shots fired at Crimea airbase – live updates

This graph shows how the Micex index (+3.4%) has only recovered a third of yesterday’s losses – meaning those Russian billionaires who lost $13bn on Monday have still shed a hefty chunk of wealth:


Today’s rally stock market rally underlines just short-term and reactive the financial markets can be, with news flashes and tweets swiftly pored over by investors and ‘black box’ trading machines.

As Kit Juckes, Societe Generale’s foreign exchange expert, puts:

Tensions in the Ukraine and Crimea have (temporarily) been eased. Russian troops have finished their ‘military exercise’ and financial market tension is melting away. And no, of course it’s not ‘all over’.

The economic fallout, notably in Russia, will be significant and building political stability in the Ukraine remains a huge challenge. But financial markets are short-sighted animals and everything is calmer.


Bloomberg has calculated that Russia and Ukraine’s billionaires saw $12.8bn wiped off their collective fortunes yesterday, as global stock market slid. (details here).

Stock markets bounce back in relief rally

European stock markets are bouncing back, following the Russian stock market higher on hopes that the Ukraine crisis may be easing a little.

News that Russian troops close to the Ukraine border will return to their camps by Friday sent the main indices bouncing back.

Investors are calculating that the risk of military conflict between the two countries had fallen.

The FTSE 100 index has leapt 80 points, or 1.2%, recovering most of yesterday’s 101-point slide.

Germany’s DAX, which is heavy with companies with large exposure to the Russian economy is up almost 1%. It tumbled 3.4% yesterday, in its biggest one-day slide since November 2011.

Spain, Italy and France are all up over 1%.

And in Moscow, the MICEX is almost 4% higher as traders rush to buy stocks, a day after battling to dump their portfolios.

The ruble is still also up 0.8% against the US dollar at 36.3 to the $.

Ishaq Siddiqi of ETX Capital says share are rallying because “global markets have been anxious that the mobilisation of Russian troops could mean something more serious.”

He added:

Market sentiment remains fragile and anxious at best with traders transfixed with developments in the Ukraine.

Russian troops began the military exercises almost a week ago, close to the country’s border with Ukraine. Their presence had stoked fears that that could be mobilised into pro-Russian areas of eastern Ukraine.

Bloomberg flags up that the exercises are ending ‘on schedule’, with the troops now expected back at their bases by this Friday, March 7.

Here’s Associated Press take on the latest developments in Ukraine:

Vladimir Putin ordered tens of thousands of Russian troops participating in military exercises near Ukraine’s border to return to their bases as U.S. Secretary of State John Kerry was on his way to Kiev.

Tensions remained high in the strategic Ukrainian peninsula of Crimea with troops loyal to Moscow fired warning shots at protesting Ukrainian soldiers.

It was not clear if Putin’s move was an attempt to heed the West’s call to de-escalate the crisis that has put Ukraine’s future on the line.

It came as Kerry was on his way to Kiev to meet with the new Ukrainian leadership that deposed a pro-Russian president, and has accused Moscow of a military invasion. The Kremlin, which does not recognize the new Ukrainian leadership, insists it made the move in order to protest millions of Russians living there.

AP’s full story is online here.


UPDATED: Oil is also falling, with Brent crude dropping almost 1.5% to $109.60 per barrel.


The gold price has dropped almost 1% this morning, down $11 per ounce at $1,338, having soared to a four-month high yesterday on the back of the Crimea crisis.

Russian MICEX claws back some losses

Good morning.

The Russian stock market is rallying this morning after yesterday’s torrid selloff, on reports that Vladimir Putin has instructed troops on military exercises in Western Russia, close to Ukraine, back to base.

Interfax reported early this morning that Putin had ordered “Russian military units and divisions involved with surprise drills to return to their permanent bases”.

There’s no specific reference to Crimea, though, after days of growing pressure on Moscow over the occupation of the peninsula over the weekend.

Stocks leapt in Moscow as the news broke. After spiking 5%, the MICEX index settled up around 3% — clawing back around a quarter of Monday’s heavy losses in which around $55bn was wiped off the market.

The ruble is also strengthening having hit record lows yesterday. It’s up around 0.8% at 36.2 rubles to the US dollar.

Oil and gold have also dropped in early trading, reflecting relief that the threat to the global economy could be easing.

The news comes as John Kerry, US secretary of state, heads to the Ukranian capital, Kiev, later today, as Western government’s debate how best to respond to Putin.

Here’s our latest Ukraine news story from last night: Ukraine crisis: US-Europe rifts on Russia surface

I’ll be tracking the latest development in the financial markets, the world economy, the eurozone and business through the day. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

  • trade online

Join the discussion