BBC News - Putin warns Europe of gas shortages over Ukraine debts

Russian President Vladimir Putin has warned European leaders that Ukraine's delays in paying for Russian gas have created a "critical situation".

Pipelines transiting Ukraine deliver Russian gas to several EU countries and there are fears that the current tensions could trigger gas shortages.

Pro-Russian separatists are holed up in official buildings in Donetsk and Luhansk, eastern Ukraine.

Meanwhile, a European human rights body has stripped Russia of voting rights.

The Parliamentary Assembly of the Council of Europe (PACE) monitors human rights in 47 member states, including Russia and Ukraine.

Protesting against Russia's annexation of Crimea last month, PACE suspended Russia's voting rights as well as Russian participation in election observer missions.

The Russian delegation had boycotted the meeting. Its leader, Alexei Pushkov, described the proceedings as a "farce.

Activists inside the Donetsk government building have proclaimed a "Donetsk Republic"

Russian state gas giant Gazprom says Ukraine's debt for supplies of Russian gas has risen above $2bn (£1.2bn; 1.4bn euros).

Gazprom said on Wednesday it could demand advance payments from Kiev for gas but President Putin said the company should hold off, pending talks with "our partners" - widely believed to mean the EU.

In a letter to European leaders, President Putin warned that the "critical" situation could affect deliveries of gas to Europe, his spokesman Dmitry Peskov said.

The letter released by the Kremlin says that if Ukraine does not settle its energy bill, Gazprom will be "compelled" to switch over to advance payment, and if those payments are not made, it "will completely or partially cease gas deliveries".

Mr Putin adds that Russia was "prepared to participate in the effort to stabilise and restore Ukraine's economy" but only on "equal terms" with the EU.

And he says that while Russia has been subsidising the Ukrainian economy with cheap gas, Europe has been exploiting its raw materials and worsening its trade deficit.

The US state department later said it condemned "Russia's efforts to use energy as a tool of coercion against Ukraine".

Spokeswoman Jen Psaki said the price Ukraine was being charged for its gas was "well above the average price paid by EU members".

Nearly a third of the EU's natural gas comes from Russia.

Previous Russian gas disputes with Ukraine have led to severe gas shortages in several EU countries. The EU says it has extra gas supplies and reverse-flow technology to deal with any such disruption now.

Buildings occupied

In Kiev, the authorities said Ukraine would not prosecute pro-Russian activists occupying official buildings in Donetsk and Luhansk if they surrendered their weapons.

The separatists in the east - a mainly Russian-speaking region with close ties to Russia - are demanding referendums on self-rule. In Donetsk they have declared a "people's republic". Gunmen have been seen among the protesters in Luhansk.

Ukraine has accused Russia of stirring up the unrest, a claim Moscow denies.

Meanwhile, Nato has unveiled satellite images it says show some 40,000 Russian troops near the Ukrainian border in late March and early April, along with tanks, armoured vehicles, artillery and aircraft.

British Brigadier Gary Deakin, speaking at Nato military headquarters in Belgium, said it was a force that was "very capable, at high readiness, and... close to routes and lines of communication".

A Russian military officer said the images dated from August last year and denied there had been a build-up of troops along the border, Russia's Ria Novosti news agency reported.

Several satellite images have been released by the Supreme Headquarters Allied Powers Europe of the Russia/Ukraine border areas. This photo, which Nato says was taken on 22 March, appears to show Russia's elite Spetsnaz forces stationed at Yeysk in southern Russia, near the border

This image purports to show a Russian artillery battalion at a military base near Nonocherkassk, east of the Sea of Azov in southern Russia

This apparently shows Russian tanks at a base near Kuzminka on 27 March

Ukraine fears that the Russian separatist actions are a provocation similar to the protests that gripped Crimea days before Russian troops annexed the peninsula last month. Russia denies the claim.

President Putin said on Thursday his decision to annex Crimea was taken after secret opinion polls and had not been planned in advance.

Speaking to political supporters near Moscow, he said the first poll showed 80% of the Crimean population wanted to join Russia. He said he had not made any decision until it was "clear what the mood of the people was".

Russia, the US, Ukraine and the EU are to hold talks in Geneva next Thursday to try to resolve the impasse, EU diplomats have said.

They will be the first four-way talks since the crisis began.

Russian Foreign Minister Sergei Lavrov told US Secretary of State John Kerry by telephone on Wednesday that the meeting should focus on fostering dialogue among Ukrainians and not on bilateral relations among the participants.

In another development, the Kremlin announced that President Putin had sacked 14 generals. They were sacked from the emergencies ministry and prison service, as well as regional branches of the interior ministry and the Investigative Committee (Russia's equivalent of the FBI).

It was not immediately clear if the move was a routine step. Russia has some 800 generals in its army alone.

Bloomberg News - Greek Bond Sale Said to Top $4 Billion in Market Return

Photographer: Angelos Tzortzinis/Bloomberg

A Greek national flag flies above the national parliament building in Athens. The Greek government had been shut out of bond markets since March 2010 and kept afloat with bailouts totaling 240 billion euros from the euro area and the IMF

Greece is ending a four-year exile from international markets with a bond sale of 3 billion euros ($4.2 billion), more than the government estimated, according to a person familiar with the matter.

The order book for the issue, which carries a coupon of 4.75 percent, exceeded 20 billion euros, said the person, who asked not to be identified because he isn’t authorized to speak about it. A Greek government official told reporters in Athens yesterday that Greece sought to raise 2.5 billion euros in the five-year bond issue.

“Greece returns to the bond markets under the same or even better terms than Ireland and Portugal,” Greek Deputy Prime Minister Evangelos Venizelos told reporters in Athens today after meeting with Prime Minister Antonis Samaras.

Greece, which has been bailed out twice, carried out the world’s biggest sovereign-debt restructuring and teetered on the brink of exiting the euro, had been shut out of bond markets since March 2010 and kept afloat with aid totaling 240 billion euros from the euro area and theInternational Monetary Fund.

Those funds necessitated the regular presence in Athens of officials from the so-called troika of the European Commission, the European Central Bank and the IMF, which became associated with austerity measures that triggered a political and social backlash.

‘Important Milestone’

“We welcome this,” Poul Thomsen, the IMF’s mission chief to Greece, said yesterday. “It’s a fundamental objective of the program to bring Greece back to market and this is an important milestone in this regard, and that clearly speaks to the success of the program.”

The yield on Greek 10-year bonds climbed three basis points, or 0.03 percentage point, to 5.92 percent at 11:10 a.m. London time. The rate fell 27 basis points yesterday, and touched 5.80 percent, the least since February 2010.

Greek securities returned 33 percent in the year through yesterday, the most among sovereign-debt markets tracked by the Bloomberg World Bond Indexes.

A car bomb exploded outside one of the Bank of Greece’s offices in central Athens this morning as a reminder of the upheaval that continues to rock the country almost four years after it resorted to calling for outside aid. Police said no one was injured in the bombing.

Some Damage

Protests, strikes and even bombings have been regular occurrences in Greece since then. Today’s device exploded at about 6 a.m. outside a building belonging to the Bank of Greece, causing some damage to surrounding buildings, a police spokeswoman said by phone.

Greece won approval this month from euro-area members for an 8.3 billion-euro aid payment, the first disbursement from its bailout program since December. The government and European Union predict that the Greek economy will expand 0.6 percent in 2014 after six consecutive years of contraction that has cost about a quarter of the nation’s economic output and sent theunemployment rate surging.

“The real economy is showing encouraging signs of recovery,” Greek Finance Minister Yannis Stournaras said at a conference in Athens today.

Greece’s unemployment rate dropped to 26.7% in January from 27.2% in the previous month, according to data today from the Athens-based Hellenic Statistical Authority.

The country still faces challenges including deflation. Consumer prices calculated using a harmonized EU method dropped 1.5 percent in March from a year earlier, the 13th straight decline. Non-performing loans ballooned to 31.7 percent of total lending at the end of 2013, according to data provided by the Bank of Greece.

To contact the reporters on this story: Marcus Bensasson in Athens atmbensasson@bloomberg.net; Hannah Benjamin in London at hbenjamin1@bloomberg.net

Reuters News - G20 to focus on boosting global growth, not Crimea: official

International Monetary Fund (IMF) Managing Director Christine Lagarde speaks at a news conference during the G20 Central Bank Governors and Finance Ministers annual meeting in Sydney, February 23, 2014.

CREDIT: REUTERS/JASON REED

(Reuters) - Global financial leaders will thrash out details of individual country pledges to boost growth and overhaul their economies at this week's meetings in Washington, a senior Australian official said on Tuesday.

Group of 20 countries promised at their last meeting in Sydney in February to lift global output by an extra 2 percent over five years, with individual action plans due later this year.

Although geopolitical risks stemming from the crisis in Ukraine were also on the table, growth would take center stage, Australia's G20 Finance Deputy Barry Sterland said in a telephone interview.

"To build momentum on those growth strategies is really a key goal for this meeting," he said. "A big focus of this meeting is going to be building on that growth ambition, discussing the sorts of measures that are needed to meet the Sydney growth goal."

Australia chairs the bloc of advanced and developing economies this year and has asked for firm plans to address gaps in each country's policy settings in the second half of 2014.

According to a document prepared for the G20 by European Union finance ministers, reform drafts so far have fallen short and more ambitious work is needed in areas including investment, employment and competition.

The International Monetary Fund forecast global growth at 3.6 percent this year while warning of geopolitical risks amid a tug of war between Russia and Western countries over Ukraine.

Russia, also a G20 member, has been hit with EU and U.S. sanctions over its annexation of Ukraine's Crimea region.

G20 officials have said they expect the group's communiqué, to be issued after Friday's meeting, will not specifically mention the crisis in Ukraine.

Sterland said there would be a discussion of the "full range" of geopolitical risks, but noted that Ukraine had already been an issue at the last G20 just six weeks earlier, and there was no plan for joint action against Russia.

"That sort of theme would not be on the agenda for this meeting," Sterland said.

Australia's Foreign Minister Julie Bishop has said it depends on G20 member countries whether Russia is invited to the G20 leaders' summit this year.

DEFLATION EYED

At Friday's meeting, emerging markets are again expected to raise concerns about spillover effects from central banks normalizing policy in advanced economies, a worry which featured prominently at the Sydney meetings.

The U.S. Federal Reserve is on track to wind up bond purchases by the end of this year as the U.S. economy recovers, although the European Central Bank is under pressure to do more to support growth.

The G20's February communiqué said that the timing of monetary policy withdrawal should be conditional on the outlook for price stability as well as growth - sounding a note of caution given the euro zone's extremely low inflation.

"Those comments in Sydney seem to remain appropriate. We are taking an approach to keep the communiqués relatively tight," Sterland said.

The ECB has so far resisted calls from the IMF to ease monetary policy further although it said last week it was ready to start asset purchases, also known as quantitative easing, if inflation proved persistently low.

A German government official said Germany planned to tell the IMF and G20 partners it sees no deflation tendencies in Europe, noting instead that low inflation came from lower energy prices and moderate wage hikes.

(Reporting by Krista Hughes in Washington and Cecile Lefort in Sydney; Additional reporting by Jan Strupczewski in Brussels, Lidia Kelly in Moscow and Gernot Heller in Berlin; Editing by Lisa Shumaker)

BBC News - Japan and Australia agree trade deal

Japan and Australia have agreed a trade deal which will see them lower tariffs on imports of key products.

Australia's prime minister has called the trade agreement a historic one

Japan has agreed to lower duties on Australian beef and raise the duty-free quota on cheese - Australia's biggest dairy export to Japan.

Australia will cut tariffs on Japanese electronics, cars and white goods.

The deal, agreed after seven years of negotiations, is expected to be finalised later this year when Japan's prime minister visits Australia.

Australia's Prime Minister Tony Abbott, who is currently visiting Japan, called the pact a historic one.

"This is the first time that Japan has negotiated a comprehensive economic partnership agreement or free trade agreement with a major economy, particularly a major economy with a strong agricultural sector," Mr Abbott said.

Broader deal

The pact between the two countries comes as officials are trying to push for an ambitious US-led 12-nation free trade plan, the Trans-Pacific Partnership (TPP).

Negotiations between representatives of the various nations, which include Australia and Japan, hit a roadblock earlier this year.

Differences on the issues of tariffs on imported goods, particularly between the US and Japan, were among the issues that were unresolved.

Agricultural tariffs have become a sticking point for Japan, which is keen to protect its rice, wheat, beef and pork producers from outside competition.

Some analysts suggested that the Australian and Japan deal may help spur progress on the TPP talks.

Aurelia George Mulgan, a professor of Japanese politics at University of New South Wales said the bilateral deal means that "Australia gets preferential treatment over the US."

She said that US would be under pressure to agree a deal that puts it "on a level playing field with Australia".

"Japan knows that America wants it on board, because TPP without Japan is not much worth all that much. Japan is playing hardball," she added.

US President Barack Obama is scheduled to tour the region, including Japan, in the coming weeks and is expected to discuss the issue.

'Moderate recovery'

Meanwhile, as expected, the Bank of Japan did not announce any new stimulus measures at the end of its two day meeting,, and said it was not expanding its bond buying programme.

"Japan's economy has continued to recover moderately as a trend, albeit with some fluctuations due to the consumption tax hike," the Bank of Japan said in a statement.

"Private consumption and housing investment have remained resilient as a trend with improvement in the employment and income situation."

Tokyo's Nikkei stock market fell 1.4%, its biggest drop in two weeks, as exporter shares were hit by a continued stronger yen.

Reuters News - Norway's $860 billion oil fund needs study before buying new types of assets: minister

(Reuters) - Norway's $860 billion oil fund, the world's biggest sovereign wealth fund, is not ready to invest in new types of assets and needs a year to study whether to buy infrastructure or unlisted assets, Finance Minister Siv Jensen said on Monday.

She said the fund needed to see how its small but growing real estate portfolio functions and what the risk of more active management would be.

"We are in a learning process on building up in real estate ... and that's the portfolio we're actually discussing with broadening in the (unlisted) sector," Jensen told reporters.

The fund, which invests Norway's oil revenues, is one of the biggest investors in the world, holding about 1 percent of all global shares. Many investors watch its investment decisions keenly as a result.

Jensen unveiled a series of reforms last Friday but did not recommend new types of assets on top of its listed stocks, bonds and real estate portfolio, disappointing some critics.

The central bank, which manages the fund, earlier this year said the fund needs to take on greater risk because the current framework is unlikely to yield the 4 percent long-term return expected by the government.

"There is a great consensus that a (bigger) active portfolio represents more risk and that's something we need to look into before we conclude," Jensen said.

"If we are to broaden the active portfolio, it will be natural to discuss infrastructure and other means as well, ... this is something we will come back to in the (white) paper next year," she added.

The real estate portfolio is still just 1 percent of the fund, short of the 5 percent limit, and the central bank has been building up expertise for years to handle this new portfolio.

As part of its active management program, the fund holds meetings with companies where it wants change and actively pushes its proposals with the board and management.

(Reporting by Balazs Koranyi Editing by Jeremy Gaunt)

BBC News - ECB keeps interest rates on hold at 0.25%

Europe's central bank kept interest rates at 0.25%

ECB keeps interest rates on hold

The European Central Bank (ECB) has kept its benchmark interest rate at a record low of 0.25%.

It comes despite the fact that inflation in the currency bloc fell to a five year low in March.

Eurozone interest rates have remained unchanged since November 2013, when the bank said it expected "a prolonged period of low inflation".

This week figures showed inflation continued to fall in March to 0.5%, well below the ECB's target of 2%.

March was the sixth month that inflation in the eurozone was trapped in what ECB President Mario Draghi has called "the danger zone" below 1%.

It was also the third month in row in which inflation fell.

The fear attached to lower inflation is it could harm the eurozone's nascent economic recovery, by weakening consumer demand for goods and services because households would be likely to put off spending believing prices will continue to fall.

Low inflation also means that governments and businesses find it more difficult to repay their debts.

Monetary easing

While the ECB was not expected to cut interest rates, analysts suggested it might adopt less conventional measures to boost the eurozone economy.

These might include a new round of cheap loans to banks or large-scale purchases of financial assets, similar to the US Federal Reserve's $65bn (£39bn) monthly bond-buying programme known as quantitative easing.

Howard Archer, chief UK and European economist at IHS Global Insight, said there was "obviously a very strong case" for taking interest rates to zero given how far inflation had fallen and the fact the euro was currently trading at a two and half year high against the US dollar of $1.40.

"However, the ECB will likely have taken some comfort from ongoing evidence that gradual eurozone economic recovery is continuing and there has not been an 'unwarranted' tightening in money markets," he added.

But Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management, said the ECB's decision to hold interest rates would do little for the eurozone recovery.

"By not doing anything significant as deflation edges ever closer. Mr Draghi has let markets entertain the idea that he's going to do something without him having to actually do much. That's a dangerous game of poker and sometime soon he's going to have show his hand," he said.

Reuters News - U.S. stock markets are rigged, says author Michael Lewis

A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013.

CREDIT: REUTERS/CARLO ALLEGRI

(Reuters) - The U.S. stock market is rigged in favor of high-speed electronic trading firms, which use their advantages to extract billions from investors, according to Michael Lewis, author of a new book on the topic, "Flash Boys: A Wall Street Revolt."

High-frequency trading (HFT) is a practice carried out by many banks and proprietary trading firms using sophisticated computer programs to send gobs of orders into the market, executing a small portion of them when opportunities arise to capitalize on price imbalances, or to make markets. HFT makes up more than half of all U.S. trading volume.

The trading methods and technology that make HFT possible are all legal, and the stock exchanges HFT firms trade on are highly regulated. But Lewis said these firms are using their speed advantage to profit at the expense of other market participants to the tune of tens of billions of dollars.

"They are able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price," Lewis, whose book is available on Monday, said on the television program "60 Minutes" on Sunday.

"This speed advantage that the faster traders have is milliseconds, some of it is fractions of milliseconds," said Lewis, whose books include "The Big Short" and "Moneyball."

Those milliseconds can be valuable, making it possible to send around 10,000 orders in the blink of an eye.

Darting in and out of trades, HFT firms make just fractions of a penny per trade, but the sheer speed and volume of their trading activity allows those that are successful to make significant profits.

Proponents of HFT argue that the presence of such firms makes it easier for all market participants to find buyers and sellers for their trades, and that the speed at which HFT firms can detect and take advantage of pricing imbalances between different markets and assets leads to smaller bid-ask spreads.

But Brad Katsuyama, former head trader in New York for the Royal Bank of Canada and a major figure in Lewis's book, said he was finding that when he would send a large stock order to the market, it would only be partially filled, and then he would have to pay a higher price for the rest of the order.

With the help of new hire Ronan Ryan, Katsuyama realized that his orders traveled along fiber optic lines and hit the closest exchange first, where high frequency traders would get a glimpse, and then use their speed advantage to beat him to the other 12 U.S. public exchanges and 45 private trading venues. HFT algorithms could then buy the shares Katsuyama wanted, and then sell them to him at a slightly higher price.

Katsuyama and Ryan created a system in which RBC would send its orders first to the exchange that was the furthest away, and last to the exchange that was closest, with the goal of arriving at all places nearly simultaneously, cutting out HFT.

"Essentially, our fill rates went to 100 percent. We couldn't believe it when we actually figured it out," Katsuyama told "60 Minutes."

Katsuyama said he decided to start a new trading platform, called IEX, for the Investors' Exchange, employing similar tactics to those he used at RBC.

"It almost felt like a sense of obligation to say we found a problem that is affecting millions and millions of people - people are blindly losing money they didn't even know they were entitled to. It's a hole in the bottom of the bucket," he said.

IEX has attracted the investment of David Einhorn, the billionaire owner of hedge fund Greenlight Capital, and an endorsement from Goldman Sachs. The investors in IEX are fund companies and individuals, not banks.

"We are selling trust, we are selling transparency, and to think that trust is actually a differentiator in a service business, is actually a crazy thought, right?" said Katsuyama.

Earlier this month, New York state's Attorney General Eric Schneiderman said he believes U.S. stock exchanges and other platforms provide HFT firms with unfair advantages.

Exchanges allow trading firms to place computer servers inside the exchange's data centers so that the firms can see the data as soon as possible. The practice, called co-location, is regulated and available to anyone who wants to pay for it.

Schneiderman has begun meeting with the U.S. exchanges, which include IntercontinentalExchange Group's New York Stock Exchange, Nasdaq OMX Group's main bourse, and four platforms run by BATS Global Markets, on possible reforms, a source close to the situation told Reuters.

A ban on HFT is unlikely, as U.S. regulators would be loath to put policies in place that could lead to a less liquid market, Robert Greifeld, chief executive officer of Nasdaq, said on Thursday.

(Reporting by John McCrank; Editing by Diane Craft)