How the economic world reacted to MH17 disaster
* Spreadbetters see lower European opening, losses might be limited
* Oil extends gains, on track for weekly rise
* Fall in U.S. Treasury yields undermines greenback
Asian shares sagged on Friday and a drop in Treasury bond yields put pressure on the dollar after the downing of a Malaysian Airlines passenger plane over Ukraine sent investors scurrying into defensive assets.
The shadow was expected to fall over the European opening as well, with financial spreadbetters predicting Britain's FTSE 100 would open down 0.5pc, Germany's DAX as much as 0.7pc lower and France's CAC 40 down 0.8pc.
Some market participants felt European losses would be contained, however.
"Asian markets are off their lows and U.S. index futures seem to be paring some of their losses so the initial sell-off could be short-lived," Jonathan Sudaria, a dealer at Capital Spreads, said in a note to clients.
World leaders demanded an international investigation into the shooting down of the airliner over eastern Ukraine. All 298 people on board were killed in a tragedy that could further heighten tensions between Russia and the West.
Russia's rouble-traded MICEX dropped 1.9pc in the first minute after trading began.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2pc but was still poised to eke out a modest weekly gain.
Japan's Nikkei stock average tumbled 1 percent after dropping by as much as 1.7pc earlier in the session. The Nikkei still managed a 0.3pc rise on the week.
"This geopolitical concern can cloud such optimism in the mid-term," said Hiromitsu Kamata, head of the Japanese equity target department at Amundi Japan.
He said the plane disaster might be perceived as an isolated event for financial markets but also cautioned it had the potential to lead to greater turmoil.
Even before the news from Ukraine broke, market sentiment had been fragile after weak U.S. housing starts for June.
Wall Street had its worst day since April on Thursday with losses deepening in the last hour of trading after Israeli Prime Minister Benjamin Netanyahu instructed the military to begin a ground offensive in Gaza.
S&P 500 E-Mini futures were flat, suggesting some measure of stability might return to U.S. markets on Friday.
U.S. Treasury bond prices steadied in Asia after soaring as investors sought safety. The benchmark 10-year Treasury yield stood at 2.480 percent, not far from its U.S. close of 2.475pc, after a seven-week low of 2.441pc earlier on Thursday.
The dollar edged up about 0.2pc to 101.34 yen, clawing back some of its slide of nearly 0.5pc overnight, its biggest one-day loss since early April. A break below 101.06 yen would take the greenback to a two-month low.
"Put simply, U.S. Treasury yields declined on heightened geopolitical woes and hurt dollar/yen, which has a high correlation with yields," said Masafumi Yamamoto, a market strategist at Praevidentia Strategy in Tokyo.
The euro, which has lost roughly 0.9pc against the yen this week, traded at 137.05 yen after reaching a five-month low of 136.715 yen earlier in the session.
The euro was steady at $1.3523 but not far from $1.3512 touched earlier in the session, its lowest in a month.
In commodities trading, U.S. crude oil gained about 0.3 percent to $103.53 a barrel after jumping by more than $2 on Thursday. Russia pumps more than a tenth of the world's crude.
Brent climbed about 0.2pc to $108.13 a barrel. Both benchmarks were on track for their first weekly gain in four weeks.
Gold met profit-taking after soaring on safe-haven bids, slipping to $1,311.20 an ounce after gaining 1.5pc in the previous session. It was still on track for a weekly loss of nearly 2pc, breaking a six-week winning streak.
The pan-European FTSEurofirst 300 index was down by 0.5pc at 1,356.29 by 0705 GMT after ending Thursday 1pc lower following a sell-off in late trade sparked by reports that the Malaysian airliner had crashed.
Airline stocks such as Deutsche Lufthansa and Ryanair were 1.5pc lower, as major travel companies rerouted flights to avoid Ukranian airspace.
U.S. and Asian stocks fell sharply after a U.S. official said Washington strongly suspected the Boeing 777 was downed by a surface-to-air missile fired by Ukrainian separatists backed by Moscow. All 298 people on board were killed.
The disaster could prove a turning point for international pressure to resolve the crisis in Ukraine, which has killed hundreds since protests toppled the Moscow-backed president in Kiev in February and Russia annexed the Crimea a month later.
But uncertainty over how the incident will affect the conflict between the Ukrainian government and separatists could mean investors are reluctant to hold long positions.
"While the market response to the unfortunate air incident was not as bad as many might have expected, with this being week-end and geopolitical risk such an unknown quantity, be prepared for some risk aversion," Mike van Dulken, head of research at Accendo Markets, said in a note.