* Headlines on Donetsk counter hopes of swift resolution of
* Yen gains against euro, dollar
* French, German markets down half a percent
* U.S. corporate results offer more upbeat message
By Patrick Graham
LONDON, July 21 European stock markets fell
across the board on Monday, concerned by an escalation in
tensions between Russia and the West and reports the Ukrainian
army was moving on a major rebel stronghold.
The step up in rhetoric over Russia's involvement following
last week's downing of a Malaysian airliner had offered hope for
some investors that stronger action by Western powers could push
the conflict toward a peaceful conclusion.
But reports that Ukrainian forces were moving into the
eastern city of Donetsk added to concerns that the conflict in
one of Europe's biggest countries instead may escalate further.
"The Ukraine situation has the potential to get ever worse,"
said Hantec Markets analyst Richard Perry, referring to the
reports out of Donetsk at the start of European trading.
"Anyone who believes this step-up in rhetoric will lead to
some kind of deescalation are being complacent."
European benchmarks, the FTSE 100, DAX and
CAC 40 were all down by between 0.4 and 0.7 percent soon
The yen, traditionally a beneficiary of concerns over
geopolitical risks for markets, was up 0.3 percent against the
euro and around 0.1 percent against the dollar.
Asian markets - excluding Japan which was closed for a
holiday - had gained 0.3 percent on the back of
a strong finish for Wall Street on Friday on upbeat U.S.
corporate earnings, with more reports due this week.
Germany and other European Union members have trodden a more
cautious line on sanctions against Russia than the United States
to date, mindful of the damage an exchange of sanctions with one
of their main energy providers could do to Europe's economy.
Any escalation of sanctions would be liable to hurt
businesses, with Germany and its strong trade ties with Moscow a
"The proximity to the Ukraine crisis does cause European
investors to be a bit more circumspect over the issues there,
while Wall Street is more distant and seems to be able to push
on regardless," said Jeremy Batstone-Carr, an analyst at Charles
Stanley in London.
Shocks to the system from Ukraine and Israel's ground
invasion of Gaza come at a time when markets have been digesting
conflicting economic signals from either side of the Atlantic.
U.S. stock markets have been lifted by positive earnings
Thomson Reuters data showed that of 82 companies in the S&P
500 that had reported earnings through Friday morning, 68
percent beat Wall Street's expectations. That was roughly in
line with the 67 percent average for the past four quarters and
above the 63 percent average since 1994.
U.S. stocks rose on Friday and for the week as a whole the
Dow Jones rose 0.9 percent, while the S&P 500
gained 0.5 percent and the Nasdaq added 0.4 percent.
In Europe, economic data has been mixed and troubles at
Portugal's biggest bank have underlined worries that the rally
in European shares may be overdone in the context of the decade
of fiscal retrenchment still ahead for many countries.
U.S. 10-year yields were steady at 2.48 percent
on Monday, while German bunds were yielding just 1.15 percent
having neared all-time lows.
Crude oil prices were also knocked after enjoying a brief
rally last week. Brent fell more than 30 cents to
$106.90 a barrel as investors kept an eye on the crisis between
Moscow and the West over last week's jet crash in Ukraine. U.S.
crude fell 44 cents to $102.89 a barrel.
(Editing by Susan Fenton)