Ukraine unrest, Gaza keep pressure on shares; bonds steady

Fri Jul 18, 2014 8:06am EDT
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By Marc Jones

LONDON (Reuters) - World markets remained under pressure on Friday after a Malaysian airliner was downed near the Ukraine-Russia border and Israel stepped up a ground assault against Gaza militants.

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 lows.

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 UniCredit, said.

"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.   Continued...

A man walks past the London Stock Exchange in the City of London October 11, 2013.  REUTERS/Stefan Wermuth