GLOBAL MARKETS-Stocks, bond yields fall on latest Ukraine flare

Tue Aug 5, 2014 2:59pm EDT

* Wall St extends declines after Polish foreign minister statement

* Dollar strengthens on strong U.S. services, factory figures

* European shares rise after encouraging earnings reports (Updates with further U.S. stocks decline, quote, crude settlement)

By Chuck Mikolajczak

New York, Aug 5 (Reuters) - U.S. stocks and bond yields fell on Tuesday after a report that Russian units were set to pressure or invade Ukraine.

Wall Street stocks extended losses after a Bloomberg report that cited comments from the Polish foreign minister, Radoslaw Sikorski, on Ukraine, driving the S&P 500 below its 1,920 support level.

Bonds reversed course on the news, with yields on the 10-year note touching a session low of 2.47.

"People, they are itchy, the recent events have refocused people on the global stage as much as everybody had been kind of turning their backs to it and hoping the situation in Ukraine or the Middle East in total goes away; it's not," said Keith Bliss, senior vice president at Cuttone & Co in New York.

"This is typical in low volume, toppy markets - you don't have a lot of institutional buying and selling, it's program driven, and any little spark like this will get those things to move one way or the other."

U.S. stocks started the session on a down note after weak economic data out of China, with the HSBC/Markit services PMI falling in July to its lowest since November 2005, suggesting a recovery in the world's second-largest economy may need further government support.

But the dollar hit its highest level against a basket of currencies since September 2013 after the Institute for Supply Management said service-sector growth in the United States hit an eight-and-a-half-year peak in July on strong growth in new orders and employment.

U.S. factory orders were also strong in July and data showed positive revisions to durable goods orders, a sign that the economy continues to improve. The euro fell to a day's low of $1.3357 after the U.S. data, while the dollar hit a high of 102.92 against the yen, continuing a trend of strength in the U.S. currency.

The Dow Jones industrial average fell 149.73 points, or 0.9 percent, to 16,419.55, the S&P 500 lost 18.85 points, or 0.97 percent, to 1,920.14, and the Nasdaq Composite dropped 34.45 points, or 0.79 percent, to 4,349.43.

The MSCI All-World Index fell 0.7 percent.

European PMI figures showed the continent's economy was growing, as expected. But manufacturing remained weak and kept intact expectations the European Central Bank will ease monetary policy further, pressuring the euro.

But European stocks edged higher as investors cheered forecast-beating results from German luxury carmaker BMW and France's third-biggest listed bank, Credit Agricole, among others.

The pan-European FTSEurofirst 300 index of leading shares gained 0.3 percent, a small recovery from its nearly 4 percent fall over the past two weeks on concerns over financial uncertainty about Portugal's Banco Espirito Santo, which was later bailed out.

In commodities markets, Brent crude slipped below $105 a barrel, to settle down 80 cents at $104.61, as ample supplies outweighed Middle East turmoil, while U.S. crude settled down 91 cents to $97.38. (Reporting by Chuck Mikolajczak; Additional reporting by Daniel Bases; Editing by Dan Grebler and Leslie Adler)