Stocks stumble as Ukraine tensions worsen

Stock markets fell on Thursday after Russian-backed separatists and Ukrainian government forces accused each other of firing shells, sending traders to seek safety in government bonds and pushing gold prices to a new eight-month high.

The two sides traded accusations each had fired across the ceasefire line in eastern Ukraine, raising alarm at a time when Russia has massed more than 100,000 troops close to Ukraine’s borders. The West accuses Russia of preparing for an invasion, while Moscow says it is pulling back some troops and accuses Kyiv of planning an escalation to try to recapture rebel-held territory by force.

Losses on stock markets were widespread, though not as big as in recent sessions.

In Europe, the Euro STOXX (.STOXX) had slipped 0.1 per cent by 1150 GMT while Britain’s FTSE 100 dropped 0.65 per cent (.FTSE). Strong corporate earnings in Europe helped keep the losses in check.

Wall Street futures pointed to a lower open , while in Asia MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) eked out a 0.15 per cent rise by the close.

The MSCI world equity index (.MIWD00000PUS), which tracks shares in 50 countries, was slightly lower on the day.

Westpac analyst Sean Callow said markets were “clearly on edge” and vulnerable since a lot of traders had assumed tension was easing.

Investors bought into government bonds. Yields on the US 10-year Treasury note dropped as much as 6 basis points and were last down 1 bps at 2 per cent.

Yields on Germany’s 10-year government bond , the go-to safe-haven asset in the euro zone, were little changed at 0.267 per cent.

The Russia-Ukraine crisis is unnerving investors just as markets were already struggling. Investors are worried the pace of monetary policy tightening -- triggered by central banks needing to tame soaring inflation -- and a reduction in cheap cash will take more of the air out of highly valued asset prices.

Most major markets are down sharply in 2022, with the tech-heavy Nasdaq off 12 per cent.

Some investors advised clients not to panic over the geopolitical crisis, however.