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Asian shares slump on Ukraine fears

Friday, August 29 07:48:34

Asian shares slumped today, pulling back from a more than six-year high touched this week, after flaring Ukraine tensions spoiled investor risk appetite.

But spreadbetters predicted a steadier open ahead in Europe, suggesting the fears were receding. They expected Britain's 100 .FTSE to open nearly flat; Germany's DAX to open 13 to 16 points higher, or up 0.2 percent; and France's CAC 40 4 to 7 points higher, or up 0.2 percent.

Wall Street sagged on Thursday as Ukraine's president said Russian troops had entered his country in support of pro-Moscow rebels who captured a key coastal town, escalating the five-month-old separatist conflict.

The United States on Thursday openly accused Russia of sending combat forces into Ukraine and threatened to tighten economic sanctions, but Washington stopped short of calling Moscow's latest step an invasion.

"While the primary driver of losses in global equities were developments on the Ukraine-Russia front, there were growing signs that the recent rally in equities was beginning to stall," IG strategist Stan Shamu said in a note.

"Perhaps yesterday's news gave investors an excuse to take some profits off the table after a good run in equities," he added.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.2 percent, pulling away from Thursday's high of 515.13, its highest since early 2008. It was on track for a weekly drop but still poised for a gain of around 0.3 percent in August.

Japan's Nikkei stock average shed 0.2 percent after a spate of weak Japan data. It was also down for the week, bringing its monthly loss to about 1.3 percent.

On top of geopolitical concerns, bond yields worldwide have come under pressure this week on speculation that the European Central Bank would unveil new stimulus steps as soon as next week, to stave off deflation in the euro zone.

The yield on the 10-year German Bund plunged to a record low of 0.868 percent on Thursday, and yield on 30-year U.S. Treasury bonds slumped to a 14-month low of 3.059 percent.

Sources told Reuters on Wednesday that the ECB is unlikely to take new policy action next week unless inflation figures due out later on Friday show the euro zone sinking significantly towards deflation. (Reuters)

For more visit www.businessworld.ie