Friday 6 December 2019

Ukraine nerves send European shares lower

* Headlines on Donetsk counter hopes of swift resolution of crisis
* Yen gains against euro, dollar
* French, German markets down half a percent
* U.S. corporate results offer more upbeat message

A Malaysian expert (C) examines a black box belonging to Malaysia Airlines flight MH17 during its handover from pro-Russian separatists, in Donetsk
A Malaysian expert (C) examines a black box belonging to Malaysia Airlines flight MH17 during its handover from pro-Russian separatists, in Donetsk
A Malaysian expert (L) examines a black box belonging to Malaysia Airlines flight MH17 during its handover from pro-Russian separatists, in Donetsk
Members of the media take pictures as a pro-Russian separatist places black boxes belonging to Malaysia Airlines flight MH17 on a desk, before their handover to Malaysian representatives, in Donetsk
A satellite image shows the crash site of Malaysia Airlines flight MH17 in Ukraine
Portraits of (L-R) Jenny Loh, her mother Tan Siew Poh and Popo Fan, who were victims of the Malaysia Airlines Flight MH17 plane crash, are seen as a man lays flowers during a silent march held in their memory outside the restaurant, which Loh and Fan owned, in Rotterdam
Parts of the wreckage are seen at a crash site of the Malaysia Airlines Flight MH17 near the village of Hrabove (Grabovo), Donetsk region
A passenger carriage with the word "Donbass", part of the train carrying the remains of victims of Malaysia Airlines MH17 downed over rebel-held territory in eastern Ukraine
Journalists work after a train carrying the remains of victims of Malaysia Airlines MH17 downed over rebel-held territory in eastern Ukraine arrived in the city of Kharkiv, eastern Ukraine
A train carrying the remains of the victims of Malaysia Airlines MH17 downed over rebel-held territory in eastern Ukraine arrives in the city of Kharkiv in eastern Ukraine
Protesters chant slogans demanding justice for the victims of Malaysia Airlines Flight MH17 as they follow the lead of organisers of a rally held by UMNO's youth wing outside the Russian embassy in Kuala Lumpur
Members of the youth wing of UMNO, Malaysia's largest political party, wave placards at a demonstration demanding justice for the victims of Malaysia Airlines Flight MH17 outside the Ukrainian embassy in Kuala Lumpur
A guard stands on a train carrying the remains of victims of Malaysia Airlines MH17 downed over rebel-held territory in eastern Ukraine after it arrived in the city of Kharkiv, eastern Ukraine
In this image taken from video, Thursday July 17, 2014, showing part of the wreckage of a passenger plane carrying 295 people after it was shot down Thursday as it flew over Ukraine, near the village of Hrabove, in eastern Ukraine. AP Photo / Channel 1
In this image taken from video, Thursday July 17, 2014, showing flames rising from part of the wreckage of a passenger plane carrying 295 people after it was shot down Thursday as it flew over Ukraine, near the village of Hrabove, in eastern Ukraine. AP Photo / Channel 1
In this image taken from video, Thursday July 17, 2014, showing part of the wreckage of a passenger plane carrying 295 people was shot down Thursday as it flew over the country and plumes of black smoke rose up near a rebel-held village Hrabove, in eastern Ukraine. AP Photo / Channel 1
In this image taken from video, Thursday July 17, 2014, people walk amongst the debris at the crash site after a passenger plane carrying 295 people was shot down Thursday as it flew over Ukraine, near the village of Hrabove, in eastern Ukraine. AP Photo / Channel 1
A picture taken of Malaysia MH17 as it took off from Schipol Airport shortly before it was shot down over Ukraine
Smoke rises rises from the crash site of Malaysia MH17 shortly after it was believed to have been shot down over Ukraine
Armed pro-Russian separatists stand near the crash site of Malaysia MH17
Wreckage from Malaysia MH17 near the settlement of Grabovo in the Donetsk region of Ukraine
An armed pro-Russian separatist stands the Malaysia MH17 crash site
A part of the fuselage of Malaysia MH17 can be seen in a field at the crash site in Ukraine
A map of the region where flight MH17 crashed in Ukraine
A woman reacts to news regarding a Malaysia MH17 at Kuala Lumpur International Airport in Sepang
Emergency workers at the crash site of Malaysia MH17 in Ukraine
An emergency worker puts fires out at the Malaysia MH17 crash site
An armed pro-Russian separatist takes pictures at the crash site of Malaysia MH17
Emergency workers at the Malaysia MH17 crash site
Wreckage from Malaysia flight MH17 strewn across the crash site
Wreckage of Malaysia MH17 at the crash site in Ukraine
The arrivals screen in Kuala Lumpur International Airport in Sepang showing Malaysia MH17
Smoke rises from the debris of Malaysia MH17 at the crash site in Ukraine
Fires burn as night falls on the crash site of Malaysia MH17 in Ukraine

Patrick Graham

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 after opening.

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 particular concern.

"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.

EARNINGS GAINS

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 news.

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.

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