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MOSCOW Aug 6 Russian shares touched three-month lows on Wednesday after President Vladimir Putin ordered his government to prepare retaliatory measures against Western sanctions as the crisis over Ukraine threatened to escalate.
Both the dollar-denominated RTS index and rouble-based MICEX hit their lowest since early May before recovering by 0845 GMT to trade 1.2 percent lower at 1,177 points and 0.4 percent weaker at 1,352 points, respectively.
The rouble bounced off a three-and-a-half month low against the dollar, also weighed down by strong U.S. data which supported the greenback.
Putin told his government to discuss a "careful" response to Western economic sanctions targeting Moscow's banking, energy and defence sectors after the market close on Tuesday.
Meanwhile, Kiev pressed on with an offensive in eastern Ukraine as Poland's prime minister said he had reason to suspect the threat of direct military intervention across the border by Russia had risen over the last couple of days.
"The situation in Ukraine is not adding any positive sentiment, as the (Ukrainian) government is indicating its intentions to launch an assault on Donetsk; and there is a build-up of Russian troops along the border," analysts at Alfa Bank said in a note.
Donetsk is the major stronghold of pro-Russian rebels in the east of the former Soviet republic. The West accuses Russia of backing and arming the rebels, a charge Moscow denies.
East-West tensions over Ukraine contributed to broader risk aversion on global markets, with Asian stocks falling after a slump on Wall Street.
Also weighing on Russian assets was global oil benchmark Brent, which hovered near a nine-month low, hit by weak seasonal demand and poor refinery margins in a well-supplied global market.
Russia's top bank Sberbank, which was sanctioned by the European Union last week and is seen as a barometer for the wider Russian economy, was among the worst performers on Wednesday, falling 2 percent on MICEX. Top gas producer Gazprom fell 1.5 percent.
The rouble was 0.25 percent weaker at 36.17 against the dollar and also 0.17 percent weaker at 48.33 against the euro , leaving it 0.24 percent weaker at 41.65 against the dollar-euro basket.
For rouble poll data see
For Russian equities guide see
For Russian treasury bonds see
Russia in graphics: link.reuters.com/dun63s (Reporting by Alexander Winning, editing by Jason Bush and John Stonestreet)