As investors scurried into defensive assets, European shares
<.FTEU3> saw more selling after falling heavily on Thursday. Demand
for safe-haven German government bonds kept their yields near record
World leaders demanded an international investigation into the
downing of the Malaysian plane with 298 people on board over eastern
Ukraine. Kiev and Moscow blamed each other for a tragedy that stoked
tensions between Russia and the West.
Russia markets took the heaviest hit. Dollar-traded stocks in Moscow
<.IRTS> were down another 2.3 percent to put their losses for the
week at more than 8 percent. The ruble <RUB=> recovered almost half
a percent on the day but was heading for its biggest weekly loss in
more than a year.
"While Ukraine, Russia and the rebels deny any involvement or
responsibility, tensions will most likely continue into the
weekend," Michael Rottmann, head of fixed income strategy at
"Furthermore, Israel sending ground troops into the Gaza Strip adds
to geopolitical concerns. While at current levels both Bunds and
U.S. Treasury valuations look extremely rich, it is clearly not the
time to position in the opposite direction."
There were some signs that markets were trying to steady. Some
analysts wondered whether the Malaysian jet tragedy could bring the
two sides in Ukraine to the negotiating table and take the heat out
of the crisis.
The United States called for an immediate ceasefire to allow easy
access to the crash sitel. Pro-Russian separatists told the
Organisation for Security and Cooperation in Europe (OSCE), a
security and rights body, they would ensure safe access for
international experts visiting the scene.
Gold <dipped as buyers cashed in on some of its 1.5 percent
overnight jump. The Japanese yen and U.S. government bonds the safe haven investors usually head for - both gave
up some ground.
European shares took back some of their initial falls. International
Consolidated Airlines, owner of British Airways and Iberia, rose,
although the region's other two big names, Air France and
U.S. futures were also flat, suggesting some measure of
stability might return to U.S. markets.
It was set to be another hectic day of company earnings. Analysts
were already digesting some pre-market releases from global
manufacturing giants General Electric's and Honeywell plus Bank of
New York Mellon.
The situation in Ukraine and the rising tensions between the West
and Russia were not the only concern weighing on sentiment.
Israel announced the start of a Gaza ground campaign on Thursday
after 10 days of aerial and naval bombardments failed to stop
Palestinian rocket attacks.
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Asian markets had a turbulent day. Most emerging Asian currencies
fell and Japan's Nikkei stock average tumbled 1 percent to keep
MSCI's 45-country All World index on course for a second week
"The general theme in the market, the predominant theme today, seems
to be risk aversion. So we do expect dollar/Asia to head higher in
the near term," said Divya Devesh, currency strategist for Standard
Chartered in Singapore.
"Whether this move will be sustained is still quite uncertain. It
will depend on how the geopolitical risks unfold."
In contrast to the broader downward global trend, European shares
looked set to end the week up 0.5 percent. One reason is
expectations the ECB will keep euro zone interest rates near zero
for considerably longer than the Federal Reserve or Bank of England.
The head of the International Monetary Fund, Christine Lagarde,
warned on Friday, however, that markets were "perhaps too upbeat"
about the region. Germany Bundesbank chief, Jens Weidmann, also
stirred thoughts as cited a litany of long-term dangers of
continually providing easy money.
"There is a danger that the low interest rates will be used not to
consolidate (government) budgets, but to finance additional
spending," the German said as one of his concerns.
The dollar edged up about 0.2 percent to 101.34 yen <JPY=>,
regaining some of its overnight loss of nearly 0.5 percent, its
biggest one-day loss since early April.
The euro, which has lost roughly 0.9 percent against the yen this
week, traded at 137.05 yen after reaching a five-month low and
hovered near a one-month low versus the dollar at $1.3524
In commodities trading, U.S. crude oil gained about 0.2 percent to
$103.41 a barrel after jumping by more than $2 on Thursday. Brent
was fetching 108.25, up 1.5 percent on the week. Russia pumps more
than a tenth of the world's crude.
(Editing by Larry King)
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