GLOBAL MARKETS-Stocks dip around the world on new Russia sanctions

Thu Jul 17, 2014 10:52am EDT

* Russia assets fall as U.S., EU impose more sanctions
    * U.S. housing starts weak, but Morgan Stanley up on results
    * European shares sag after strongest day in three months

 (Updates to the open of U.S. trading, changes byline and
dateline, previously LONDON)
    By Ryan Vlastelica
    NEW YORK, July 17 (Reuters) - Stock markets around the world
weakened on Thursday as tighter Western sanctions against Russia
raised the specter of greater geopolitical tensions ahead, while
weak U.S. data gave investors further pause.
    Despite those concerns, major indexes were off their lows of
the session, and safe-haven assets like gold and U.S. bonds were
only modestly higher on the day. Crude oil was sharply higher.
    The new U.S. sanctions announced late on Wednesday
effectively shut off longer-term dollar funding for companies
close to President Vladimir Putin. European Union leaders agreed
to target Russian firms that help destabilize Ukraine, and to
block new loans to Russia through two development banks.
  
    Such measures had been threatened for weeks, but the
decision to push ahead unsettled investors who had questioned
the appetite to do so, especially in Europe.
    Moscow's MICEX stock market fell 2.3 percent, its
dollar-traded cousin, the RTS index, dropped 3.8 percent
and the rouble lost more than 1 percent against both the
dollar and the euro. 
    "The issue isn't how the sanctions will impact the Russian
economy, but how geopolitical tensions will rise or fall as a
result, and right now it is too soon to tell," said Jonathan
Lewis, chief investment officer at Samson Capital Advisors in
New York.
    The sanctions are aimed at tightening pressure on Moscow to
help calm the crisis in Ukraine, where hundreds of people have
been killed in months of fighting between government forces and
pro-Russian separatists.
    The Russian Foreign Ministry said it saw the American
sanctions as "a primitive attempt to avenge the fact that
developments in Ukraine are not following Washington's
scenario," and that it was disappointed Europe had "succumbed to
the blackmail of the U.S." 
    Wall Street stocks were also pressured by a weak read on
U.S. housing starts, which fell well short of expectations in
June, though Morgan Stanley shares rose 1.2 percent after
earnings topped expectations.  
    The Dow Jones industrial average rose 2.92 points or
0.02 percent, to 17,141.12, the S&P 500 lost 1.22 points
or 0.06 percent, to 1,980.35 and the Nasdaq Composite 
dropped 6.25 points or 0.14 percent, to 4,419.72. On Wednesday,
the Dow closed at a new record.
    The U.S. 10-year Treasury note rose 8/32 in
price, yielding 2.5088 percent.
    "Even without the Russia and Ukraine issue, the housing data
was considerably weaker than expected, pointing to the
fundamentals that continue to support higher bond prices," said
Lewis, who helps oversee about $7.4 billion in assets.
    Other safe-haven assets initially rose on concerns that
Moscow, which provides much of Europe's gas, could hit back with
retaliatory measures, though they subsequently moved back
towards breakeven territory. The Japanese yen and Swiss
franc were both little changed, while the U.S. dollar
 was flat against a basket of currencies.
    The pan-European FTSEurofirst 300 was down 0.4
percent, well off its lows of the day. The MSCI International
ACWI Price Index fell less than 0.2 percent.
    Revised euro zone inflation data underscored the need for
the ECB, which has talked about large-scale bond buys, to stay
on its toes, as it remained deep in what Mario Draghi has termed
the sub-1 percent "danger zone." 
           
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
   Asset returns in 2014         link.reuters.com/gap87v
   Russia stocks                 link.reuters.com/guv77v 
   Currencies v dollar           link.reuters.com/tak27s
   ECB rates, inflation and euro link.reuters.com/jer39v
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
           
    OIL, GOLD CLIMB 
    The Russia tensions also supported commodities markets, with
U.S. crude futures up 0.9 percent to $102.16 per barrel
and Brent fetching almost $108.
    Gold rose 0.4 percent, though it remained near a
four-week low as investors weighed the possibility U.S. interest
rates would rise sooner than expected. 
    Silver were up 0.5 percent while copper 
dipped 0.1 percent.

 (Editing by Meredith Mazzilli)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.