* European shares fall over Ukraine but head for weekly gain
* Dollar index slips even as yen drifts off session highs
* Bunds gain as investors head for safety
By Marc Jones
LONDON, April 25 Heightened tension in Ukraine
pushed world shares lower and lifted safe-haven European bonds
on Friday, taking the shine off what looked set to be an
earnings and M&A-driven week of gains for European and U.S.
Trouble in Ukraine escalated after Ukrainian forces killed
up to five pro-Russia separatists on Thursday and Russia
conducted military drills near the border, raising fears it was
gearing up to invade.
European shares tumbled 0.5 percent in early
trading as concerns also rose that the United States and Europe
were readying increasingly tough sanctions on Russia which were
bound to be met with retaliatory measures from
The DAX in Germany, which has the region's biggest
trade ties with Russia, were down almost 1 percent in early
deals as the country's government bonds, favoured
by risk-wary investors, made ground.
Among the region's other main indexes the FTSE and
CAC40 in London and Paris dropped 0.3 and 0.4 percent.
Shares in Moscow were staring at a weekly loss
of almost 6 percent as they, and the rouble, took another
bashing after Russia was also downgraded by Standard's &
"The escalation of tension in Ukraine is likely to keep
markets risk-off," said Kyosuke Suzuki, director of forex at
Asian stocks had also stumbled earlier after Wall Street had
also struggled to shake off the geopolitical uncertainty despite
some upbeat earnings.
U.S. Secretary of State John Kerry has said time is running
out for Moscow to change its course in Ukraine and sources told
Reuters President Barack Obama was expected to speak to European
leaders on Friday to push for fresh sanctions against Russia.
A gloomy day for Chinese equities further
darkened the mood in Asia as concerns about the state of China's
economy and its banking sector continued. The country's currency
the yuan also hit a fresh 16-month low.
The dollar was stuck near a one-week low versus the
yen on Friday, struggling to gain traction as rising tension in
Ukraine offset optimism about U.S. economic growth.
The dollar last stood at 102.25 yen, not far from
Thursday's one-week low of 102.085, at the end of a lacklustre
week against the safe-haven yen during which it has lost about
"Geopolitical risks are not having too much of an impact on
currencies with most investors still focused on growth
prospects," Credit Agricole FX strategist Manuel Oliveri said.
The euro held steady at $1.3835, having recovered
from Thursday's low of $1.3791 hit after European Central Bank
President Mario Draghi reiterated the potential for asset
purchases to ward off deflation risks.
For commodities front, spot gold was down about 0.1
percent at $1,292.30 an ounce after touching its lowest levels
since February on Thursday, though fears about the Ukraine
crisis provided some support.
Copper touched a session high of $6,775 a tonne, as
demand from China helped lift it to its strongest since March 7,
and was last up about 0.2 percent at $6,763.
Brent crude was down slightly at $110.32 a barrel,
but was holding close to seven-week highs after surging $1.22 a
barrel on Thursday.
(Additional reporting by Anirban Nag in London; Editing by