* Euro looks to test $1.40 resistance level
* Ukraine, China slowdown and copper rout sap risk appetite
* Russian shares slide to lowest in over 4 years
* Gold hits 6-month high; euro, Swiss franc 2 1/2-year high
By Alistair Smout
LONDON, March 13 The euro hit a new 2-1/2 year
high against the dollar on Thursday as concerns over China's
economy and international tensions over Ukraine took the fizz
out of an attempted rebound in riskier assets.
U.S. stock index futures pointed to a stronger start on Wall
Street than in Europe or Asia, however, with the S&P 500
on track to open in positive territory, supported by
retail sales and jobs data that pointed to a strengthening U.S.
The euro reached $1.3967 and looked set to test
psychological resistance at a $1.40, in a sign that the currency
may be regaining safe-haven status as the euro zone starts to
recover from its prolonged sovereign debt crisis.
The euro zone economy seems to be picking up steam and
investors are betting that the European Central Bank will not
ease policy further to counter deflation risks, even though ECB
policymaker Benoit Coeure reiterated the bank's readiness to act
if real interest rates didn't fall.
"The policy messages and data support the euro and we think
that will allow it to continue to push higher from here," said
Ian Stannard, a strategist at Morgan Stanley in London.
More traditional safe-havens also strengthened, with the
Swiss franc extending gains against the dollar to hit
0.8696 francs - its strongest since late 2011. The Japanese yen
Stock markets in Europe were flat, pinned near one-month
lows, with the pan-European FTSEurofirst 300 unable to
recoup any of the 1.1 percent drop in the previous session.
The move echoed trading in Asia, where MSCI's broadest index
of Asia-Pacific shares outside Japan managed to
rise 0.5 percent, clawing back half the previous day's losses,
despite concerns over Chinese growth that limited gains.
Soft Chinese data dented many markets. Japan's Nikkei
slipped 0.1 percent, erasing gains made after Japanese
machinery orders beat expectations, while South Korean shares
also lost most of their earlier gains.
China's industrial output growth came in below forecasts for
the combined January/February period, with retail sales also
weaker than expected, stoking worries that growth could slow as
Beijing pushes for economic reforms.
"The China economy is slowing quite sharply, in our view...
(although) the lack of inflation and slowing growth does open
the door for policy easing," Gerard Lane, equity strategist at
Shore Capital, said in a note.
The MSCI All-Country World index edged up
0.1 percent, not far from an eight-day low hit on Wednesday.
A major victim of concerns over China, copper
dropped 0.4 percent to $6,476.75 a tonne, a day after it hit a
four-year low at $6,376.25.
After a tumble in copper of around 7.5 percent so far this
month, investors are worried about a possible unravelling of
Chinese loan deals using the metal - whose many industrial uses
make it sensitive to global economic health - as collateral.
The diplomatic stalemate between Russia and the West over
Crimea also supported safe haven assets.
Russia's RTS stock index fell 1.2 percent to its
lowest point in over four years, while five-year credit default
swaps rose 14 basis points to their highest since June 2012.
Gold hit a six-month high of $1,374.85, while U.S.
Treasuries have erased all the losses made following last week's
strong payrolls data. The benchmark 10-year yield
was 2.73 percent on Thursday versus its six-week high of 2.82
percent hit last Friday.
The European Union agreed on a framework on Wednesday for
its first sanctions on Russia since the Cold War.
"Markets are nervous over China and Ukraine, with the latter
weighing the most because of the uncertainty of what will happen
next and the seeming lack of any coordinated or effective
response," Titan Investment Partners trader Darren Sinden said.
Geopolitical tension also supported oil. The European
benchmark Brent held relatively firm at $107.94 as it
drew support from the unfolding crisis in Ukraine.
U.S. crude futures steadied, although they remained
near one-month lows hit on Wednesday after Washington announced
a surprise plan for a test release of strategic oil reserves.
In debt markets, Irish government bond yields hit new record
lows before Dublin's first regular debt auction since its 2010
bailout, seen as a post-crisis watershed for the country.
Ireland's successful return to regular bond auctions was
undermined, however, by GDP data just half an hour later which
showed a shock 2.3 percent decline in the fourth quarter.