Marc Jones London
Bruised share markets took a further battering yesterday on growing fears of military conflict in Ukraine.
Towns in eastern Ukraine were preparing for military action from government forces after Kiev gave pro-Russian separatists a 9am deadline to disarm and end their occupation. As the deadline passed, a reporter in the flashpoint city of Slaviansk, where armed men had seized two government buildings, said there was no outward sign the rebels were complying with the ultimatum.
It meant more uncertainty for financial markets. Asian equities ceded ground in late trade. Europe followed suit, with the FTSEEurofirst 300 index down 0.4 percent in early trading, although a flurry of merger and acquisition activity helped limit the falls.
Germany, a country with some of biggest links to Russia, led the drop as its DAX fell 0.7 percent to a three-week low.
“The escalation sharply increases risks of an all-out civil war in Ukraine,” said Bank of America Merrill Lynch analysts in a research note. “Even though it is still not our baseline scenario, the entire development is clearly negative for the market [and raises] renewed fears of another wave of sanctions from the West.”
Russian markets slid. The rouble and Moscow’s main stock market were both down about 1 percent, while the country’s key bonds hovered cautiously as the cost of insurance against default rose.
The yen benefited from the heightened risk aversion and the dollar was nudged down to ¥101.59. Spot gold benefited from the move towards safe haven assets, fixing at $1 324.50 an ounce yesterday morning in London, up $6.50 from Friday afternoon’s fix. – Reuters