REFILE-GLOBAL MARKETS- Russian tensions, weak German data hurt European assets

Wed Aug 6, 2014 4:36am EDT

(Refiles to add date)

* Stocks fall as Russian troops gather near Ukraine border

* German industrial orders slide, sanctions bite

* Euro falls to nine-month low versus dollar

* German Bund yields fall as investors seek refuge

By John Geddie

LONDON, Aug 6 (Reuters) - European stocks fell on Wednesday while nervous investors took refuge in high-rated bonds on reports of a build-up of Russian troops near the border with Ukraine.

The euro came under pressure, trading at nine-month low against the dollar amid threats of retaliatory Russian sanctions against the European Union, and signs the crisis in Ukraine was hitting Europe's biggest economy Germany.

German industrial orders slid in June at their steepest rate since September 2011, with the economy ministry saying geopolitical tensions had probably led to more cautious ordering.

"We are getting closer to a situation where we really have an escalation of the conflict...sanctions being stepped up, and things moving out of control," said Elwin de Groot, senior market economist at Rabobank.

European stocks fell 0.6 percent shortly after Wednesday's open, while MSCI's world equity index - which tracks shares in 45 countries - was down 0.3 percent. Dollar-traded Russian stocks hit a three-month low.

In China, the CSI300 of the leading Shanghai and Shenzhen A-share listings recovered after falling as much as 1 percent during Asian hours.

German 10-year bond yields fell 3 basis points to 1.15 percent.

The move starting shortly after Poland's foreign minister said Russia's military presence on the Ukrainian border was designed to put pressure on the neighbouring country or as a prelude to entering it.

Russian Prime Minister Dmitry Medvedev also threatened on Tuesday to retaliate for the grounding of a subsidiary of national airline Aeroflot because of EU sanctions, with a newspaper reporting that European flights to Asia over Siberia could be banned.

Risk aversion and upbeat U.S. economic data, which included a spike in service-sector activity to a nine-year peak and a uptick in factory orders, helped lift the dollar to an 11-month high against a basket of major currencies.

The dollar index rose to as high as 81.637, its highest level since last September, before falling back to 81.555 after Europe's open.

The New Zealand dollar skidded to two-month lows after milk prices fell again at an auction held by Fonterra Co-operative Group, the world's biggest dairy exporter.

Oil prices remained under pressure as plentiful supplies in Europe and North America outweighed fears that violence in the Middle East and North Africa could disrupt production.

Brent crude edged up 25 cents on Wednesday to $104.88, but that followed its weakest close since November 2013. U.S. crude was 21 cents firmer at $97.59, following its lowest settlement since early February.

Gold failed to get much of a lift from safe-haven flows and idled at $1,291.70 an ounce. (Editing by John Stonestreet)

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