GLOBAL MARKETS-Ukraine tensions hit shares; Wall St little changed

Thu Feb 27, 2014 11:30am EST

* Russian ruble hits 5-year low vs dollar

* Euro hits 2-week low; soft data add to uncertainty

* U.S. Treasuries yields at two-week low

* Yuan rebounds but still below PBOC fixing

By Chuck Mikolajczak

NEW YORK, Feb 27 (Reuters) - Stocks on world markets edged lower on Thursday, as tension in Ukraine and Russia curbed risk appetite, though Wall Street managed to hold near unchanged as investors tuned in to Fed chair Janet Yellen's testimony in Washington.

Saber-rattling in the Ukraine grew, as armed men seized the parliament in Ukraine's Crimea region and raised the Russian flag, alarming Kiev's new rulers, who urged Moscow not to abuse its navy base rights on the peninsula by moving troops around.

The Russian ruble touched a five-year low against the dollar , while Ukraine's hryvnia fell to a record low after its central bank abandoned its managed exchange rate policy.

The geopolitical uncertainty caused investors to seek the safety of U.S. Treasuries, driving yields to two-week lows. The 10-year note was yielding 2.649 percent. The Japanese yen and Swiss franc, both traditional safe-haven plays in foreign exchange, gained.

"There are definitely fears about geopolitics; the general mood towards emerging markets is not great. The concern is this could develop into a proper civil war in Ukraine that splits the country," Manik Narain, strategist at UBS in London, said.

Wall Street was little changed, as comments from Yellen failed to provide much clarity on the impact of the weather on recent economic weakness. Data on Thursday showed orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly rose last month, as did a gauge of business spending plans.

"Durables came in better than feared, but it is difficult to tell what the weather impact was and what the impact of an actual slowdown might be," said Joseph Tanious, global market strategist at J.P. Morgan Asset Management in New York.

Yellen, during her testimony before the Senate, said recent data pointed to a softening in spending in the U.S. economy that might be explained partly by the bad weather.

If the view holds that harsh winter weather is to blame, investors are likely to expect the Fed to keep trimming its bond-buying program by $10 billion at each policy meeting, leaving it on track to end the bond purchases completely by the end of the year.

The Dow Jones industrial average rose 0.22 point, or 0 percent, to 16,198.63, the S&P 500 gained 0.49 point, or 0.03 percent, to 1,845.65 and the Nasdaq Composite added 4.856 points, or 0.11 percent, to 4,296.92.

Shares of both J.C. Penney Co Inc and Best Buy Co Inc jumped after the companies posted strong results. Penney forecast more improvement in its comparable sales and gross profit margin this fiscal year, and Best Buy posted adjusted earnings that topped forecasts.

Penney surged 21 percent to $7.23 while Best Buy advanced 5.4 percent to $27.22. The S&P retail index <.SPXRT dipped 0.1 percent following a five-day rally

The MSCI world equity index, which tracks shares in 45 nations, slipped 0.20 point, or 0.05 percent, to 407.16.

The sharpening rhetoric in Ukraine held down Europe's main markets, which lost 0.4 percent. In Germany the DAX fell 1 percent for the biggest drop since Feb. 3, while the euro dropped to a two-week low of $1.3641.

There was plenty of additional pressure for the euro. Spain's fourth-quarter gross domestic product figures were revised downward, and ECB data showed little improvement in the amount of credit reaching euro-zone firms.

German inflation figures suggested there would be scant pick-up in euro-zone inflation, which is to be published on Friday.

The ECB meets next week and is under pressure to cut interest rates again and dip back into its unconventional policy cupboard to ensure the euro zone doesn't become mired in deflation.

In bond markets, the possibility that more moves are coming from the ECB and a strong debt auction in Italy helped lower-rated Italian and Spanish debt keep pace with safe-haven German Bunds.

Among commodities, copper dropped to a three-month low below $7,000 a tonne, extending its losses over the past week on recent concerns about slower growth in China.

Gold prices edged up due to a steady dollar, but remained well below the previous day's four-month high as buyers of coins, bars and jewelry in Asian markets held off in expectation of a further price drop. Spot gold advanced 0.2 percent $1,333.50 an ounce, off Wednesday's high of $1,345.35.

After recent falls, the yuan saw a second day of relative calm, standing at 6.1279 per dollar, just off Wednesday's low of 6.1351. A bounce in Chinese shares helped Asian shares gained 0.3 percent.

Dealers suspect the People's Bank of China has engineered the recent decline in the country's currency to inject more two-way volatility into the market and wrong-foot speculators who had bet on its continued rise.

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