Stocks gain on Russia bets but Treasuries fall only marginally

Mon Aug 11, 2014 4:52pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - A global gauge of equities rose for a second straight day on Monday, posting its largest daily advance in four months on bets on a reduced risk of direct conflict between Russia and Ukraine.

The yield on benchmark U.S. debt rose only slightly while spot gold prices barely ticked lower.

Perception among stock buyers of a de-escalation of the conflict in the Russia-Ukraine border held even as Russia was sending an aid convoy to eastern Ukraine, after the West warned Moscow against using humanitarian help as a pretext for an invasion.

NATO sees a "high probability" of a Russian invasion of eastern Ukraine as some 20,000 Russian troops massed on the nearby border. Kiev had the number at 45,000 Russian troops.

"News of humanitarian efforts (in eastern Ukraine) seem to have soothed the markets," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"It seems like U.S. investors who are taking a risk on Russian equities don't deem NATO's statement as a legitimate concern. They're taking Russia's actions at face value, and not interpreting it as a cover for military action."

The Market Vectors Russia ETF (RSX.P: Quote) gained 1.4 percent while the dollar-denominated RTS index .IRTS rose 2.8 percent and the rouble-based MICEX .MCX rose 1.8 percent.

Investors also monitored Iraq, where the United States recently began air strikes targeting Islamic State fighters marching on the country's Kurdish capital. In Baghdad, the political showdown continued as Nuri al-Maliki refused to bow to U.S. and Iranian pressure to step aside after Iraq's president named a less polarizing prime minister.   Continued...

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange August 11, 2014.      REUTERS/Joachim Herrmann/Remote