* DAX set for biggest weekly fall since peak of euro crisis
* Yen builds on sharp overnight gains against dollar, euro
* Russian shares plummet before Sunday's Crimea referendum
* U.S. data reinforces taper views; China data fuels fears
* Wall Street set for subdued start
By Marc Jones
LONDON, March 14 Heightened tensions between the
West and Russia ahead of Ukraine's weekend referendum in Crimea
pushed world stocks to their lowest in more than a month on
Friday and left investors scurrying into safe-haven gold and
With the West ramping up talks of sanctions and Russia
hitting back with promises of retaliatory measures and displays
of military prowess, financial markets were left to watch
Wall Street was set to add to this week's losses,
while a third straight day of declines on European stock markets
left them down almost one percent and potentially
facing their biggest weekly drop since June when the Federal
Reserve hinted it would taper economic stimulus.
Hardest hit was Moscow's MICEX index. It fell more
than 5 percent before clawing back some of its losses to be down
2.5 percent. There was no let up for the rouble either as
it rumbled along at an all-time low.
"The Ukraine is one of the most serious geopolitical
situations at the moment and how it plays out is difficult to
forecast," Salman Ahmed, a global fixed-income strategist at the
investment arm of Swiss private bank Lombard Odier, said.
"The main risk factor is that it morphs into an unintended
clash and there is bloodshed."
Part of the concern over the Crimea referendum on Sunday is
that is could encourage other pro-Moscow parts of the country to
follow suit and potentially embolden Russia in the region.
U.S. Secretary of State John Kerry met Russian counterpart
Sergei Lavrov in London in last-ditch diplomatic efforts to
defuse tensions, but Moscow and the West appeared increasingly
Russia shipped more troops into Crimea on Friday and
repeated its threat to invade other parts of Ukraine, showing no
sign of listening to Western pleas to back off from the worst
confrontation since the Cold War.
AGGRESSION AND ESCALATION
With Russian assets continuing to slump, investors were
taking the view that while the situation was hurting, Vladimir
Putin and the Kremlin were unlikely to flinch.
"Obviously Russia will not back down so it all points to an
escalation," Viktor Szabo, a fund manager at Aberdeen Asset
Management who holds Ukraine and Russian bonds, said.
"I think it is even more important from Russia's point of
view because the U.S. and Europe have been pretty clear that
they see the annexation of Ukraine as a move of aggression and
that they will move further in terms of sanctions."
The East-West tensions were not the only thing weighing on
markets, however. Jitters also remained over the degree to which
China's economy is slowing after unsettling data this weak.
Copper, seen as a proxy for China's fortunes, steadied after
its dizzying 5-percent fall this week, but MSCI's broadest index
of Asia-Pacific shares outside Japan touched its
lowest level since mid-February. Tokyo ended the week
down more than 6 percent after 3.3 percent dive on Friday.
Among Europe's main indexes, Germany's DAX, whose
constituents are heavily exposed to Russia, saw the steepest
falls as a one percent fall saw it heading for its biggest
weekly drop since the height of the euro crisis in June 2012.
One of the reasons for the Nikkei's decline was that the
latest developments in the Ukraine crisis sent the safe-haven
yen soaring against both the dollar and the euro.
"Investors are unwinding their long positions in the Nikkei
and short positions in the yen," Kyoya Okazawa, head of global
equities and commodity derivatives at BNP Paribas, said.
As U.S. trading began, the greenback was down about 0.5
percent at 101.20 yen, while the euro slipped a similar
amount to 140.45 yen.
Solid U.S. retail sales and employment data on Thursday had
also reinforced expectations that the U.S. Federal Reserve will
stick to its plan of gradually withdrawing its asset-buying
stimulus. That came after disappointing Chinese economic data.
The scuttle to safety pushed down German government bond
yields after those on the benchmark 10-year U.S. Treasury note
had fallen to two-week low 2.62 percent in Europe.
Gold, another safe-haven favourite, climbed through the day
to a new six-month high of $1,376 an ounce, and was
poised for its sixth straight weekly rise.
China's worries continued to weigh on the Australian dollar,
considered a proxy for China plays, sending it down
about 0.2 percent to $0.9009. Oil held above $107 a
barrel but remained on track for its third straight weekly loss.
The euro also remained under pressure after comments
from European Central Bank President Mario Draghi, who said the
bank has been preparing additional policy steps to guard against
deflation taking hold in the euro zone.
The single currency was steady at $1.3876, moving
away from Thursday's 2-1/2-year high of $1.3967 hit before