LONDON, July 21 (Reuters) - Russian markets, under the shadow of new sanctions, slumped 1.4 percent on Monday, extending last week's 5 percent slide, while UAE property stocks came under renewed pressure, hit by troubled building company Arabtec.
The increasingly deadly conflict between Israel and Gaza-based militants, fighting in eastern Ukraine and new sanctions on Russia over its perceived role in the Ukraine crisis were capping further advances in global equities, with MSCI's emerging index half percent off recent 16-month highs .
The shooting down of a passenger jet over Ukraine has significantly worsened Russia's relations with the West. The United States last week slapped new sanctions on Russia while Britain, Germany and France have agreed they should be ready to ratchet up sanctions over the downing of the Malaysian airliner.
European foreign ministers meet in Brussels on Tuesday.
Moscow-listed stocks fell 1.4 percent after last week's 5 percent slide to one-month lows with shares in Rosneft , one of the sanctioned companies, dipping to 2-1/2 month lows. Russian stocks are this year's worst performers among emerging market, having lost 12 percent in dollar terms, compared with 6 percent gains for the MSCI index as a whole.
On bond markets, Russia's sovereign 2030 dollar bond stabilised off six-week lows hit last week while Rosneft's 2022 dollar bond fell almost one cent, but stayed off recent 5-week lows.
The rouble meanwhile firmed 0.3 percent, rising off five-week lows versus the dollar.
"There is a bit of stability (in currency and bond prices) after significant selling pressure last week. Also the sanctions are targeting a limited number of companies which are not in urgent need of finance in the short-term," Sebastien Barbe, head of emerging FX strategy at Credit Agricole in Paris, said.
"There is also talk the central bank may hike rates this week and that's supporting the rouble," he said referring to the upcoming policy meeting on Friday.
Commerzbank analysts advised clients to stay underweight rouble debt and neutral on hard currency Russian bonds.
"Tomorrow's EU foreign minister meeting is obviously going to be the next dateline for markets ... Given all the events of the past weeks, as well as increasing U.S. sanctions, EU leaders are coming under heightened pressure to do something to make their point," Commerzbank told clients.
Five-year Russian credit default swaps (CDS) rose 8 basis points to 216 bps, up more than 40 bps since early last week, Markit data shows. Ukraine 5-year CDS rose 21 bps to 793 bps.
In the Gulf, markets stabilised after opening sharply lower as shares in builder Arabtec plunged for a second day after a weekend statement from key shareholder Aabar Investments appeared to dash expectations of support.
The Dubai index initially tumbled around 3 percent, adding to a 6 percent slide on Sunday. Nearby Abu Dhabi fell 1 percent, after losing 3 percent in the previous session. Both markets later traded firmer as some buyers crept in.
Foreign investors remain wary of the market however, dominated by local retail buyers and prone to wild swings.
"The renewed volatility is not going to do any favours for Arabatec and the market. With the lack of visibility, this is not one of those special situations where we would seek to pick up distressed stock at a discount," Daniel Broby, chief executive of Gemfonds in London, said.
Other big UAE real estate firms such as Aldar and Union Properties also slumped but recovered during the session. The Saudi and Qatari stock indexes also fell but losses were muted.
South Africa's rand touched three-week highs, holding on to gains from last week when the central bank raised rates. Central European currencies were stable.
"The market has not completely priced the re-emergence of political risk worldwide and we must be careful because of that," Barbe of Credit Agricole said.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Chris Vellacott. Editing by Jane Merriman)