GLOBAL MARKETS-Stocks, bond yields slip as Ukraine crisis deepens

Thu Aug 28, 2014 4:31pm EDT

* S&P 500 index sinks below 2,000 after record Wednesday
close
    * Euro hits 21-month low vs Swiss franc, weaker against yen
    * Traders focus on weak European data, brush off upbeat U.S.
GDP
    * Bund yields hit new lows, U.S. 30-year yield lowest in 14
months

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, Aug 28 (Reuters) - Stock markets around the world
fell on Thursday after Ukraine said Russia had moved more troops
into the country, deepening the regional crisis, as nervous
investors shifted money into gold and U.S. and German government
bonds.
    The euro hit a 21-month low against the Swiss franc and fell
against the yen as worries about intensified fighting between
the Ukrainian military and pro-Russian separatists in eastern
Ukraine drove investors to seek safe-haven currencies. 
    Ukrainian President Petro Poroshenko said Russian forces had
entered Ukraine, and he convened his security and defense
council to decide how to respond. Russia's defense ministry
denied that Moscow had dispatched troops into Ukraine.
  
    "Geopolitics is driving the market again, and this latest
escalation in Ukraine comes as European stocks were ripe for a
pull-back," said Alexandre Baradez, chief market analyst at IG
France in Paris.
    The tensions dragged down European equities and share prices
in other markets, with the S&P 500 index retreating below
the 2,000 threshold following a record close on Wednesday.
    The Dow Jones industrial average closed down 41.35
points, or 0.24 percent, at 17,080.66, the S&P 500 ended
3.25 points, or 0.16 percent lower, at 1,996.87 and the Nasdaq
Composite finished down 11.93 points, or 0.26 percent,
at 4,557.70. 
    The pan-European FTSEurofirst 300 index snapped its
three-day winning streak, closing 0.6 percent lower at 1,369.33
points. Tokyo's Nikkei ended down 0.5 percent at
15,459.86.  
     The MSCI world equity index, which tracks
shares in 45 nations, fell 1.56 points, or 0.36 percent, to
430.69.
     Meanwhile, 10-year German Bund yields hit a
record low of 0.868 percent, and 30-year U.S. bond yields
 touched 3.059 percent, the lowest in 14 months.
  
    Bond yields worldwide have fallen in recent days as traders
bet that the European Central Bank would unveil new stimulus as
soon as next week in a bid to avert deflation in the euro zone. 
    German inflation for August came in at a steady 0.8 percent
ahead of Friday's euro zone number. Corresponding Spanish
figures saw a slightly smaller-than-forecast drop as revised
second quarter GDP held steady.  
    The weak inflation readings overshadowed an upwardly revised
U.S. second-quarter economic growth reading. 
 
    In the currency market, the euro fell 0.3 percent to 136.71
yen and nearly 0.1 percent versus the Swiss franc to
1.2060 francs after hitting a 21-month low of 1.2050
francs. 
    The dollar reversed earlier losses against most major
currencies in the wake of the GDP upgrade and Wall Street paring
its earlier decline. The dollar index clung to a mild
0.04 percent rise to 82.46. 
    Safe-haven demand pushed spot gold prices higher for a third
consecutive day, rising 0.6 percent to 1,290.00 an ounce. 
    London oil prices finished lower but held above their recent
14-month lows on short-term supply concerns. Brent crude 
for October delivery settled down 26 cents, or 0.25 percent, at
$102.46 a barrel, while U.S. crude futures settled up 67
cents, or 0.71 percent, at $94.55 per barrel. 

 (Additional reporting by Karen Brettell in New York; Marc
Jones, Sujata Rao and Marius Zaharia in London; Editing by John
Stonestreet, Meredith Mazzilli and Paul Simao)
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