* Headlines on Donetsk counter hopes of swift resolution of
* Yen gains against euro, dollar
* German stock market down half a percent
* U.S. corporate results offer more upbeat message
By Patrick Graham
LONDON, July 21 European stock markets lost more
ground on Monday, with optimism over U.S. corporate results
drowned out by concern over the situation in Ukraine and the
potential for growth-sapping sanctions.
A step-up in U.S. and British rhetoric over Russia's role in
Ukraine after 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 is being complacent."
European benchmarks all lost ground
with Germany's DAX index more than half a percent lower
. U.S. markets were set to open 0.1-0.2 percent lower.
The yen, traditionally a beneficiary of concerns over
geopolitical risks for markets, gained as much as 0.3 percent
against the euro before cooling off.
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 and hopes for another
round of upbeat U.S. corporate earnings this week.
Germany and other European Union members have trodden a more
cautious line on moves against Russia than the United States,
mindful of the damage an exchange of sanctions with one of their
main energy providers could do to Europe's economy.
Any limitations on trade would be liable to hurt businesses,
with Germany and its strong ties with the Russian economy 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.
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.
But in the United States, Thomson Reuters data showed that
of 82 companies in the S&P 500 which 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. 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 flat to lower after enjoying a brief
rally last week. Brent fell 18 cents to $107.07 a
barrel. U.S. crude was roughly unchanged at $103.14 a
Gold prices steadied above $1,300 an ounce.
(Editing by Susan Fenton)