nerves send European shares lower
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[July 21, 2014]
By Patrick Graham
LONDON (Reuters) - European stock
markets lost more ground on Monday, with optimism over U.S.
corporate results drowned out by concern over the situation in
Ukraine and the potential for growth-sapping sanctions.
A step-up in U.S. and British rhetoric over Russia's role in Ukraine
after last week's downing of a Malaysian airliner had offered hope
for some investors that stronger action by Western powers could push
the conflict toward a peaceful conclusion.
But reports that Ukrainian forces were moving into the eastern city
of Donetsk added to concerns that the conflict in one of Europe's
biggest countries instead may escalate further.
"The Ukraine situation has the potential to get ever worse," said
Hantec Markets analyst Richard Perry, referring to the reports out
of Donetsk at the start of European trading.
"Anyone who believes this step-up in rhetoric will lead to some kind
of deescalation is being complacent."
European benchmarks all lost ground with Germany's DAX index more
than half a percent lower U.S. markets were set to open 0.1-0.2
The yen, traditionally a beneficiary of concerns over geopolitical
risks for markets, gained as much as 0.3 percent against the euro
before cooling off.
Asian markets - excluding Japan, which was closed for a holiday -
had gained 0.3 percent <.MIAPJ0000PUS> on the back of a strong
finish for Wall Street on Friday and hopes for another round of
upbeat U.S. corporate earnings this week.
Germany and other European Union members have trodden a more
cautious line on moves against Russia than the United States,
mindful of the damage an exchange of sanctions with one of their
main energy providers could do to Europe's economy.
Any limitations on trade would be liable to hurt businesses, with
Germany and its strong ties with the Russian economy a particular
"The proximity to the Ukraine crisis does cause European investors
to be a bit more circumspect over the issues there, while Wall
Street is more distant and seems to be able to push on regardless,"
said Jeremy Batstone-Carr, an analyst at Charles Stanley in London.
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Shocks to the system from Ukraine and Israel's ground invasion of
Gaza come at a time when markets have been digesting conflicting
economic signals from either side of the Atlantic.
In Europe, economic data has been mixed and troubles at Portugal's
biggest bank have underlined worries that the rally in European
shares may be overdone in the context of the decade of fiscal
retrenchment still ahead for many countries.
But in the United States, Thomson Reuters data showed that of 82
companies in the S&P 500 which had reported earnings through Friday
morning, 68 percent beat Wall Street's expectations. That was
roughly in line with the 67 percent average for the past four
quarters and above the 63 percent average since 1994.
U.S. 10-year yields were steady at 2.48 percent on Monday, while
German bunds were yielding just 1.15 percent having neared all-time
Crude oil prices were flat to lower after enjoying a brief rally
last week. Brent fell 18 cents to $107.07 a barrel. U.S. crude was
roughly unchanged at $103.14 a barrel.
Gold prices steadied above $1,300 an ounce.
(Editing by Susan Fenton)
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