* Investors get ready for start of U.S. earnings season
* Rising Ukraine tension keeps risk appetite in check
* Bank of Japan maintains monetary policy as expected
By Marc Jones
LONDON, April 8 A three-day sell-off in world
stocks slowed on Tuesday as investors settled into position for
the start of U.S. earnings season and gains in China added to
signs of revived emerging-market demand.
Wall Street, nursing the bruises of the biggest drop for the
tech-focused Nasdaq since late 2011 and in two months
for the S&P 500 and Dow Jones indexes, was
expected to see a calmer conditions when trading resumes.
European shares and bonds were both being dragged down,
however, by ongoing caution amid renewed tension in Ukraine and
signs the European Central Bank may not be as eager to begin
large-scale stimulus as had been hoped.
As U.S. trading neared, London, Paris and
Frankfurt were almost 1 percent lower, while recent
strong-performing Spanish, Italian and
Portuguese indexes were down 1.5, 1.3 and 2.3 percent
There was no place to hide in the region's debt markets
either. Euro zone bond yields, a proxy for government borrowing
costs, rose in near perfect harmony while the euro
strengthened to its highest in a almost a week.
"The QE (quantitative easing) talk continues to be very much
in focus in Europe," said Jan von Gerich, the chief developed
markets strategist at Nordea in Helsinki. "The ECB is clearly
tempering the expectations, and I think the Ukraine news is also
contributing to the weakness."
Earlier, Asian stocks had managed to shrug off the gloom
from Wall Street. Chinese shares, particularly those
of banks, rose on stimulus hopes and helped to take MSCI's
benchmark emerging market index to its highest since
Emerging markets have rebounded sharply in the past two
weeks. Investors appeared to have largely put aside the worries
about geopolitics, slowing U.S. stimulus and China's stuttering
economy that had fuelled their turbulent start to the year.
It wasn't all one way traffic though. Japan's Nikkei
fell 1.4 percent on concern over global tech stocks. The yen
also rose as the Bank of Japan kept its policy steady on
Tuesday and offered little to suggest more stimulus was likely
in the near term.
The latest Wall Street shakeout comes as investors prepare
for the first-quarter corporate earning season, which begins
later when resources giant Alcoa reports results after the
After a stellar 2013 there are signs that investors may be
falling out of love with developed market stocks.
New flow data from Swiss bank UBS showed buying of European
shares by U.S. investors has slowed for the first time since
October 2012, while UK asset manager Threadneedle Investments
said it had halved its 'overweight' in stocks.
Rising tensions in Ukraine also tempered investor appetite
for risk. Police detained 70 people occupying a regional
administration building in eastern Ukraine overnight, but
pro-Moscow protesters held out in a standoff in two other
cities, in what Kiev called a Russian-led plan to divide the
Against the yen, the dollar fell about 0.8 percent to 102.24
yen, well off the 2 1/2-month high of 104.13 yen it
reached on Friday.
The euro also bumped lower, down about 0.4 percent to 140.94
yen. But the cooling QE talk pushed it up against the
dollar at 1.3788, rebounding from Friday's five-week low
After ECB policymakers stoked expectations at their policy
meeting last week, some of the more conservative members
suggested on Monday the bank was not yet ready to begin the kind
of mass asset-buying used in the United States, Japan and UK.
"QE is definitely something that the ECB has been discussing,
but we still think the bar to full blown-purchases of government
bonds is still very, very high," said Vasileios Gkionakis Global
head of FX strategy at UniCredit in London.
GOLD, OIL FIRM
World financial powers are set to gather this week at the
IMF's Spring Meeting. Washington engaged in some pre-meeting
jockeying with China, warning Beijing that recent depreciation
of the Chinese currency could raise "serious concerns".
Much of the focus is likely to concentrate on Russia's moves
into Ukraine. They are being met with the threat of stronger
sanctions from the West, though Russian stocks and the
rouble seemed largely unconcerned on Tuesday.
In commodity markets, safe-haven gold was trading
around two-week highs, up about 1.2 percent from the previous
session at $1,311.45 an ounce.
U.S. crude for May gained about 0.7 percent to
$101.20 a barrel, pushed up by the renewed tensions over
Ukraine, a major supply route for Russian gas to Europe. But the
rise was capped by expectations U.S. crude oil stocks were
Brent rose 0.5 percent to $106.35 a barrel.
(Reporting by Marc Jones; Editing by Larry King and Angus