Renewed Ukraine tension deals another blow to battered stocks

Mon Apr 14, 2014 8:05am EDT
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By Marc Jones

LONDON (Reuters) - There was no let-up for bruised share markets on Monday as growing fears of a military conflict in Ukraine followed last week's heavy sell-off on Wall Street, Tokyo and major European exchanges.

Ukraine's president threatened military action after pro-Russian separatists occupying government buildings in the east ignored an ultimatum to leave and another group of rebels attacked a police headquarters in the region.

For financial markets that meant yet more uncertainty. Asian markets had conceded more ground overnight, and Europe followed suit with the pan-regional FTSEurofirst 300 down 0.4 percent as U.S. trading approached.

A flurry of M&A activity, including a $6 billion copper mine sale from Glencore Xstrata, helped cushion the falls, which were driven by a 0.6 percent decline in the Dax. German-listed firms have some of the biggest links to Russia.

"The escalation sharply increases risks of an all-out civil war in Ukraine," said Bank of America Merrill Lynch analysts in a research note.

"Even though it is still not our baseline scenario, the entire development is clearly negative for the market (and raises) renewed fears of another wave of sanctions from the West."

Russian markets also tumbled. The rouble and Moscow's main stock market were down around 0.7 and 1.5 percent, while the country's key bonds stayed under pressure as the cost of insurance against default increased.

European Union foreign ministers will hold talks later on Monday about tougher sanctions against Russia. The worry for many is that the two sides end up imposing increasingly tough measures that will inevitably harm both.   Continued...

An employee of a foreign exchange trading company works behind monitors in Tokyo November 28, 2013. REUTERS/Toru Hanai