(Recasts, updates prices)
By Sujata Rao
LONDON, April 28 World stocks steadied above
10-day lows on Monday, with investors holding back from making
aggressive bets as tensions between Russia and the West over
Ukraine showed no sign of easing.
MSCI's world equity index was flat after
falling 0.7 percent on Friday.
Markets, especially in Asia, had earlier been hit by signals
that Chinese authorities are unlikely to support the economy
with more stimulus, but European stocks drew support from merger
moves and upbeat results in the pharmaceutical sector.
The tensions over Ukraine boosted Brent oil prices
above $110 a barrel, near a seven-week high, and prompted some
investors to seek safety in assets such as the yen, which was
close to one-week highs against the dollar.
U.S. President Barack Obama announced new sanctions against
some Russians on Monday to stop President Vladimir Putin from
fomenting the rebellion in eastern Ukraine.
Obama said he was holding broader measures against Russia's
economy "in reserve". The European Union is expected to add
targets to its Russia sanctions list later.
Pro-Moscow rebels have seized public buildings in Ukraine's
east and are holding several international monitors hostage in
the city of Slavyansk.
"Events in the Ukraine are expected once again to take
centre stage this week," said Markus Huber, senior analyst at
Peregrine & Black.
"Traders will closely watch today how negotiations continue
to proceed concerning the release of the captured Western
observers and the new sanctions."
European stocks rose 0.4 percent, thanks to a 15
percent jump in AstraZeneca after U.S. drugmaker Pfizer
said it wanted to buy its smaller British rival in a
deal potentially worth more than $100 billion.
Shares in Bayer jumped 4.7 percent after posting
forecast-beating quarterly results.
"Thanks to central banks' massive (provision of) liquidity,
a lot of companies are now looking for takeover targets across
the board, which is very positive for the market," said Lionel
Jardin, head of institutional sales at Assya Capital in Paris.
Expectations of merger-related inflows also helped sterling
to a new 4-1/2 year high.
OIL GETS BOOST
Emerging stocks slumped to a one-month low, led
lower by Shanghai and Moscow.
Investor sentiment towards China took a hit after state
media reported President Xi Jinping as saying current fiscal and
monetary policies would basically remain unchanged following a
Politburo meeting on Friday.
Russian stocks fell more than 1 percent before
recovering, while the cost of insuring Russian debt against
default hit its highest since November 2011 as concerns grew
that new U.S. sanctions would hurt the already flagging economy.
"With the Russia-Ukraine crisis rumbling on, affecting
financial markets in both emerging and developed economies,
investors are apt to ask for how long it will continue," SEB
analyst Per Hammarlund said.
"If (Putin) continues to pursue this tactic (of supporting
rebels from outside) the implications are that the process will
be drawn out for global markets."
The dollar pulled back against a basket of six major
currencies, touching a two-week low ahead of a meeting of
the Federal Reserve which is expected to see the central bank
cut another $10 billion from its monthly bond-buying plan.
The euro rose to two-week highs against the dollar before
mid-week data that is expected to show inflation ticking higher,
easing pressure on the European Central Bank to loosen monetary
conditions in the near term.
On bond markets, Slovenian 10-year bond yields
jumped 22 basis points to 3.91 percent after Prime Minister
Alenka Bratusek lost a vote for the leadership of her
centre-left party, Positive Slovenia.
German Bund futures fell 10 ticks.
(Additional reporting by Blaise Robinson and Atul Prakash;
Editing by Catherine Evans)