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 After days of uncertainty, a train carrying the remains of some of
the almost 300 victims arrived in Ukrainian government territory and
separatist leaders have handed Malaysian authorities the aircraft's
flight recorders.
That helped settle market nerves, lifting shares both in Europe and
Asia and pushing back many of the safe-haven assets like the yen,
gold and government bonds that have been in demand over the last
week.
Europe's FTSEurofirst 300 index climbed 1 percent as the main
bourses in London, Frankfurt and Paris all made ground and
dollar-traded stocks in Moscow saw their first rise in almost two
weeks.
Wall Street futures pointed to U.S. markets starting up around 0.3
percent and the rouble also firmed, trading 0.6 percent stronger
against the dollar at 34.90 and almost 1 percent on the euro at
47.10.
"The separatists have reportedly met several of the key demands
coming from Malaysia and Western countries," Sberbank Investment
Research analysts said.
The rebound in risk was also helped by more solid U.S. company
earnings and merger activity in the previous session, though
analysts remained wary about Ukraine and Russia given the delicate
nature of events.
EU foreign ministers gather later in the day in Brussels to discuss
the situation and possibly recommend further sanctions against
Russia.
Russia's Security Council, headed by President Vladimir Putin, is
also due to meet in Moscow.
RUPIAH WOBBLE
But with the market mood clearly more upbeat for the time being, the
dollar hit a six-week high as gold dipped about two dollars to
$1,305 an ounce.
In Asian trading, MSCI's broadest index of Asia-Pacific shares
outside Japan rose about 0.75 percent to reach its highest since
2011 as shares in China saw their biggest gain in 2-1/2 months.
Most Asian currencies also climbed on the updraft.
Thailand's baht hit an eight-month high on hopes an interim
constitution planned by the military will stabilize the country.
Indonesia's rupiah wobbled though as the likely loser in its
presidential election, former general Prabowo Subianto, denounced
the vote as undemocratic, creating confusion about the official
results.
Intense fighting in the Gaza Strip has also unsettled investors in
recent days, but international efforts to end the conflict gathered
pace, with U.S. Secretary of State John Kerry holding talks in Egypt
and U.N. Secretary General Ban Ki-moon due to arrive in Israel later
in the day.
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However, there was no sign of any let-up in the fighting around
Gaza, with plumes of black smoke spiraling into the sky, and Israeli
shells raining down on the coastal enclave.
U.S. DATA
The various pockets of geopolitical uncertainty left the yield on
the benchmark 10-year U.S. Treasury - the traditional go-to asset in
times of tension - at 2.483 percent in European trading, not far
from its year low of 2.4 percent.
Yields on 30-year Treasuries inched down to 3.263 percent from a
U.S. close at 3.264 percent on Monday.
Investors were also awaiting U.S. consumer prices data due at 1230
GMT for clues to the timing of any monetary tightening by the
Federal Reserve.
The Labor Department is expected to report that U.S. inflation eased
slightly to 0.3 percent in June, after rising food prices pushed the
index to its biggest increase in more than a year in May.
"It will be interesting to see how euro dollar trades into the CPI
numbers," Saxo Bank head of FX strategy, John Hardy, said.
"If it's higher than expected, is it dollar positive on the view
that it pulls the Fed guidance forward on the first rate hike? Or is
dollar negative because the Fed is seen being complacent on
inflation and behind the curve?" he said.
The dollar rose to a six-week high against a basket of major
currencies ahead of the data, pushing the euro firmly back under
$1.35 in the process, as worries about nearby Ukraine and Russia
also weighed on the shared currency.
(Additional reporting by Lidia Kelly in Moscow and Lisa Twaronite in
Tokyo; Editing by Louise Ireland)
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