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FTSE rallies as Kerry hints at easing Russia freeze
The FTSE 100 closes 149 points higher after US Secretary of State John Kerry triggers a dramatic rebound in stock markets.
17.05: A volatile day of trading in London ended positively as US Secretary of State John Kerry triggered a dramatic rebound in world markets.
The UK's FTSE 100 closed 149 points or 2.4% higher at 6,332 after Kerry spoke of the 'constructive' moves Russia had made in relation to Ukraine in recent days.
Speaking in London Kerry said: 'Let me say that Russia has made constructive moves in the last days. There are some indications that whether it is line of control negotiations, or calm that is in place in a number of places, the withdrawal of certain people ... there are signs of constructive choices. That can only be helpful.'
His comments eased the pressure on president Putin's regime by shoring up the rouble in a way that last night's 6.5% interest rate hike Russia's central bank failed to do. From an 11% plunge to a low of 79.835 against the dollar at midday the Russian currency rallied to 67.430 versus the US currency by the end of the afternoon.
This prompted a late revival in European markets with the FTSEurofirst 300 closing 23 points or 1.8% to 1,314.
In the US the S&P 500 advanced 17 points or 0.9% to 2,007. A 'flash' purchasing managers index report showed US manufacturing continued to expand this month but at the slowest rate for six months.
Although oil continued to trade at lows – with Brent crude below $60 a barrel – energy related shares bounced back in London with Tullow Oil (TLW) racing over 6% higher to be the FTSE 100's biggest riser by the close. Royal Dutch Shell (RDSb) emerged 5.3% or £1.05 higher at £20.94 after a late rally.
FTSE falters as markets retreat on rouble & oil falls
15.10: The FTSE 100 once again surrendered early gains as US markets opened lower in response to Russia's currency crisis caused by the sliding oil price.
Shortly after Wall Street's opening the S&P 500 was 0.2% down at 1,986 and the FTSE 100 had pared back its gains to just 0.3% at 6,199.
FTSE rallies as Russia struggles with currency crisis
11.52: Stock markets remained fixated on the price of oil as an overnight hike in Russia’ interest rates failed to stem the currency crisis gripping the country, raising the prospect of a systemic crisis if energy prices continue to slide.
The Central Bank of Russia raised interest rates by 6.5% to 17% in a bid to support the rouble which has slumped as the price of oil, Russia’s key export, has tumbled since the summer.
The move briefly lifted the rouble which rallied from 65.91 to 59.18 against the dollar early this morning. The gains did not hold, however, and the rouble fell back to 65.93 versus the US currency, with Moscow’s stock market down over 3%, as the oil price resumed its descent.
Ilya Spivak, currency strategist at DailyFX, commented: ‘Russia’s current predicament looks increasingly similar to the country’s 1998 financial crisis. Then too, the central bank tried to fight a falling exchange rate with aggressive interest rate hikes. This proved fruitless, eventually resulting in a sovereign default and RUB devaluation.’
The price of Brent crude fell to just above $59 a barrel, its lowest since May 2009, while US crude shed $1.60 to $54.31 following news of a further slowdown in factory activity in China.
Despite this the FTSE 100 opened higher and clung on to its gains for the first time in a week, up 64 points or 1% at 6,247.
Confirmation that seven out of eight UK banks passed a Bank of England stress test came as a relief to investors, while a fall in inflation to 1% last month from 1.3% in October was taken as a silver lining in the dark cloud of oil prices.
The inflation news briefly weakened the pound against the dollar as investors reasoned a UK interest rate rise would be pushed well beyond the general election in May. However, sterling revived to $1.5730 after Bank of England governor Mark Carney described the inflation figure as an 'unambiguously net positive' for the UK economy.
Yields on 10-year UK government bonds dipped 0.058% to 1.748%.
The mood in Europe was gloomy with the FTSEurofirst 300 index flat at 1,290 in response to the latest downbeat purchasing managers index (PMI) report for the eurozone.
The woes of Russia hit European companies with big businesses in the country. Shares in Austrian lender Raffeisen Bank International (RBIV.VI) retreated over 5% and Danish brewer Carlsberg (CARLb.CO) and Finnish tyre maker Nokian (NRE1V.HE) slid 4% and 3% respectively.
In London Imagination Technologies (IMG) shot up 11% or 20.5p to 210.5p as half-year results from the designer of silicon chips for mobile phones and other smart devices proved better than expected.
Afren (AFRE) advanced 8% to 35.6p as the oil explorer found oil off the coast of Madagascar.
BT (BT) gained 8.5p or 2.1% to 406p after entering exclusive talks to buy EE from Orange (ORAN.PA) and Deutsche Telekom (DTEGn.DE) for up to £12.5 billion.
Power plant operator Drax (DRX) retreated another 15p or 3% to 455p following the government’s announcement of changes to the subsidies for biomass plants.
On Friday the Department for Energy and Climate Change said it would no longer guarantee the subsides under its previous renewables obligation scheme for coal plants, like Drax’s Yorkshire operation, which convert to biomass fuel.
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