Wall Street has opened higher and European stock markets have been buoyed by news of an apparent ceasefire agreement between Russia and Ukraine. Ukraine said its president Petro Poroshenko had agreed steps towards a “ceasefire regime” with Russia’s Vladimir Putin, but the Kremlin denied a deal had been struck, creating confusion on the eve of a NATO summit.

However, Putin later said his views and those of his Ukrainian counterpart on finding a political solution to the conflict in eastern Ukraine were “very close” and held out hope that an agreement between Kiev and the pro-Russian rebels could by reached by Friday.

The FTSE 100 index in London is up nearly 60 points at 6888.67, a 0.9% gain; the Dax in Frankfurt is 135 points higher at 9641.98, a 1.4% rise; and France’s CAC has climbed nearly 50 points to 4428.11, a 1.1% increase.

Russia’s dollar-denominated RTS index jumped 5.5% while the rouble-based Micex gained 3.6%. The rouble gained 1.9% against the dollar.

The FTSE 100 index will be going through its quarterly reshuffle today. Direct Line, the insurer floated by Royal Bank of Scotland two years ago, is seen as the most likely candidate for a place in the FTSE 100. Its promotion from the FTSE 250 could come at the expense of canmaker Rexam or housebuilder Barratt Developments. Barratt only rejoined the blue-chip index in March.

Chris Williams, of the UK’s first investment advice service, Wealth Horizon, said:

Today could signal a rocky time for one or more of the companies that are demoted from the index. FTSE tracker funds need to hold a certain amount of shares in each of the companies within the index, so those booted out will see the shares drop significantly as managers scurry to realign their fund portfolios to include the latest entrants instead.

With the FTSE this week posting its highest level since July, the reshuffle is likely to strengthen its long-term prospects even further. However, some investors will still be cautious to go to heavy into the index before the ECB makes a decision this week about a possible increase in its stimulus package.

There are high expectations that the European Central Bank may increase its stimulus package in its meeting tomorrow, following a pledge by ECB President Mario Draghi to use all available tools to keep the economy on course. But investors remain cautious as there remains some significant resistance to quantitative easing, particularly in Germany.

The jobs recovery in the developed world has “only just begun” and it will take years to undo the impact on employment of the financial crash of 2008, according to the Organisation for Economic Cooperation and Development. The Paris-based think-tank said in its annual employment outlook:

The employment situation has started to improve, but there is still a long way to go to make up for the job losses that occurred as a result of the global financial crisis.

For the OECD as a whole, the jobs recovery has only just begun: the OECD employment rate is currently 1.8 percentage points below its level at the start of the global financial crisis compared with 2.2 percentage points at the depth of the crisis.

The report also shows that British workers suffered the biggest decline in wages in the developed world after the financial crisis, even though unemployment has fallen.

In the UK, nearly two-thirds of workers saw falls in real wages (adjusted for inflation) in 2010 – more than the average of one worker in two across 19 OECD countries. Average hourly real wage rates continued to fall through to 2013 in the UK, matched or exceeded only by several eurozone countries hit hardest by the crisis like Greece, Spain and Ireland.

Europe’s biggest online fashion site Zalando, the main rival to Asos, has unveiled plans for an IPO that could value it at up to €6bn. It plans to list a 10-11% stake in the business on the Frankfurt stock exchange
in the hope of raising more than €500m to fund further expansion. This comes amid a flurry of e-commerce flotations, with Chinese giant Alibaba due to float later this month (18 September), along with the German venture capital house Rocket Internet, which helped launch Zalando and many other start-ups.

Here’s a profile of Zalando founder Robert Gentz, a former economist from Düsseldorf who had the initial idea on a beach in Guatemala.

The founders of Hargreaves Lansdown have reaped more than £68m in annual dividends after Royal Mail’s flotation helped business to boom at the investment company, my colleague Sean Farrell reports. Peter Hargreaves, who owns 32.18%, will make £45.7m while Stephen Lansdown, who owns 15.92% according to Reuters, will receive £22.6m.

With booming construction markets in the US and Britain inceasing demand for its industrial equipment hire business, Ashtead has increased its guidance for annual profit.

The breakdown of the Markit composite index for the eurozone reveals that Ireland remained at the top of the output growth league table in August. Business activity in Ireland rose at the quickest pace since August 2000, underpinned by a similarly strong increase in new orders.

Spain also saw output growth pick up, driven by the service sector. In Germany, growth slowed at both manufacturers and service firms. Italy dipped back into contraction territory, halting a seven-month expansion, with services particularly weak.

French output shrank for the fourth month running but the pace of decline was “mild,” Markit noted, and inflows of new business improved. Manufacturing remains in the doldrums, however.

More bad news out of the eurozone: retail sales slowed sharply in July, adding to worries about economic growth, which ground to a halt in the second quarter. Eurostat said the volume of retail sales in the 18 countries sharing the euro dropped 0.4% in July, in line with analysts’ forecasts.

The Office for National Statistics has restated the national accounts going back to 1998 to 2012.

On average, growth has been revised up by 0.1 percentage points per year. During the recent economic downturn, growth was less weak than previously estimated while, coming out of the downturn, growth has been stronger. However, the length of the downturn remains unrevised. The recent downturn has been the deepest since ONS records began in 1948. The recovery has also been the slowest.
ONS Chief Economist Joe Grice said:

Despite the wide ranging improvements underpinning the new estimates, the broad picture of the economy has not changed much. Although the downturn was less deep than previously estimated and subsequent growth stronger, it remains the case that the UK experienced the deepest recession since ONS records began in 1948 and the subsequent recovery has been unusually slow.
Over the period 1998-2012, the overall size of revisions remains small at an average of 0.1 percentage points per year.

Markit reckons its survey data points to GDP growth of 0.8% in the third quarter.

It notes, however, that the upturn has become ever more dependent on the domestically-oriented services and construction sectors as growth slowed sharply in manufacturing. The weakness of the more internationally-focused goods producing sector was linked in part to the escalating crisis in the Ukraine.

Markit’s chief economist Chris Williamson goes on to say:

The data send mixed signals to policy makers, suggesting the debate over whether the economy can withstand higher interest rates will remain intense.

Policy makers will certainly be concerned by the extent of the slowdown in manufacturing and will be eager to see whether the global economic uncertainty caused by the Ukraine crisis will also filter through to a significant slowdown in services and construction. Some impact is already evident, with growth of new orders moderating in all three sectors in August.

Employment growth also slowed further from June’s record high, down to the lowest since March as rates of job creation eased in all three sectors.

The weak manufacturing data plus the slowing of order book and employment growth in services and construction therefore reduce the risk of other members of the Bank of England’s Monetary Policy Committee joining Ian McAffferty and Martin Weale in voting for a hike in interest rates.

Dovish policy makers will also be reassured by the PMI surveys showing average prices charged for goods and services barely rising in August, showing the smallest monthly increase since May of last year. Input cost inflation also moderated, helped in part by the falling cost of imports arising from the strong exchange rate.

However, hawkish policy makers will prefer to focus on the overall PMI picture, and especially the strength of the dominant services economy, which shows the economy as a whole gaining further momentum instead of slowing, as the Bank’s projections had expected. The concern is that the growth surge in the domestic economy is eating away spare capacity, which will drive up inflation in the medium term.

The FTSE 100 index has hit its highest level in more than 14 years after the strong PMI data, climbing nearly 70 points to 6898.62, a 1% gain – only 32 points away from its all-time high of 6930, reached on 31 December 1999.

In sharp contrast to the eurozone, the UK services PMI has leapt to a 10-month high of 60.5 from July’s 59.1, better than expected. The composite index, which gauges manufacturing, services and construction activity, hit a nine-month high of 59.8, versus July’s 59.0.

However, before you reach for the champagne, a word of caution: the Ukraine crisis has clouded the outlook. New business growth at Britain’s service sector firms was the weakest in three months, and confidence fell to a 15-month low.

Services and manufacturing activity in the eurozone slowed to its weakest pace this year in August as escalating tensions between Russia and Ukraine took their toll on investment, a closely-watched survey showed.

Markit’s composite purchasing managers’ index, which is based on surveys of thousands of companies across the eurozone, fell to an eight-month low of 52.5, well below July’s 53.8. The findings will add to pressure on the European Central Bank ahead of its meeting tomorrow.

Germany, the main engine of growth, saw activity weaken to a 10-month low while France, the eurozone’s second-biggest economy, declined for a fourth month.

Germany has also seen services sector growth slow: the PMI from Markit fell from July’s 37-month high of 56.7 to 54.9 in August.

Italy is stuck in a triple-dip recession, which has wiped out all growth since 2000.

Turning to France, activity in the service sector dipped slightly to 50.3 from 50.4 in July, but stayed in positive territory – while manufacturing output fell sharply last month.

In contrast to Spain, Italy, the eurozone’s third-largest economy, saw a decline in its service industries last month. The PMI fell to 49.8, below the key 50 line which signals expansion, from 52.8 in July. This is the first sub-50 reading since March.

Spain recorded the fastest rise in services activity since December 2006, led by the finance industry while hotels and restaurants saw the slowest growth last month. The headline business activity index surprised economists with a jump to 58.1 in August from 56.2 in July.