Gaza violence, plane crash in Ukraine hit stocks
Credit: Reuters/Lucas Jackson
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York July 14, 2014.
Despite those concerns, major indexes were off their lows of the session, and safe-haven assets like gold and U.S. bonds were only modestly higher on the day. Crude oil was sharply higher.
The new U.S. sanctions announced late on Wednesday effectively shut off longer-term dollar funding for companies close to President Vladimir Putin. European Union leaders agreed to target Russian firms that help destabilize Ukraine, and to block new loans to Russia through two development banks.
Such measures had been threatened for weeks, but the decision to push ahead unsettled investors who had questioned the appetite to do so, especially in Europe.
Moscow's MICEX stock market fell 2.3 percent, its dollar-traded cousin, the RTS index, dropped 3.8 percent and the rouble RUB= lost more than 1 percent against both the dollar and the euro.
'The issue isn't how the sanctions will impact the Russian economy, but how geopolitical tensions will rise or fall as a result, and right now it is too soon to tell,' said Jonathan Lewis, chief investment officer at Samson Capital Advisors in New York.
The sanctions are aimed at tightening pressure on Moscow to help calm the crisis in Ukraine, where hundreds of people have been killed in months of fighting between government forces and pro-Russian separatists.
The Russian Foreign Ministry said it saw the American sanctions as 'a primitive attempt to avenge the fact that developments in Ukraine are not following Washington's scenario,' and that it was disappointed Europe had 'succumbed to the blackmail of the U.S.'
Wall Street stocks were also pressured by a weak read on U.S. housing starts, which fell well short of expectations in June, though Morgan Stanley (MS.N) shares rose 1.2 percent after earnings topped expectations.
The Dow Jones industrial average rose 2.92 points or 0.02 percent, to 17,141.12, the S&P 500 lost 1.22 points or 0.06 percent, to 1,980.35 and the Nasdaq Composite dropped 6.25 points or 0.14 percent, to 4,419.72. On Wednesday, the Dow closed at a new record. The U.S. 10-year Treasury note rose 8/32 in price, yielding 2.5088 percent.
'Even without the Russia and Ukraine issue, the housing data was considerably weaker than expected, pointing to the fundamentals that continue to support higher bond prices,' said Lewis, who helps oversee about $7.4 billion in assets.
Other safe-haven assets initially rose on concerns that Moscow, which provides much of Europe's gas, could hit back with retaliatory measures, though they subsequently moved back towards breakeven territory. The Japanese yen JPY= and Swiss franc CHF= were both little changed, while the U.S. dollar was flat against a basket of currencies.
The pan-European FTSEurofirst 300 was down 0.4 percent, well off its lows of the day. The MSCI International ACWI Price Index fell less than 0.2 percent.
Revised euro zone inflation data underscored the need for the ECB, which has talked about large-scale bond buys, to stay on its toes, as it remained deep in what Mario Draghi has termed the sub-1 percent 'danger zone.'
OIL, GOLD CLIMB
The Russia tensions also supported commodities markets, with U.S. crude futures up 0.9 percent to $102.16 per barrel and Brent LCOc1 fetching almost $108.
Gold rose 0.4 percent, though it remained near a four-week low as investors weighed the possibility U.S. interest rates would rise sooner than expected.
Silver were up 0.5 percent while copper dipped 0.1 percent.
(Editing by Meredith Mazzilli)
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