GLOBAL MARKETS-Shares off to cautious start on Ukraine anxiety
* U.S. stock futures up slightly, U.S. bond futures tick
down
* Markets focus on world reaction to eastern Ukraine
referendum
* Euro under pressure after last week’s ECB threat on its
strength
By Hideyuki Sano
TOKYO, May 12 (Reuters) – Asian shares began the week on a
cautious note on Monday as investors braced for a possible
escalation in East-West tensions after anti-Kyiv rebels declared
victory in a referendum on self-rule in eastern Ukraine.
Organisers of the weekend referendum said nearly 90 percent
had voted in favour, possibly opening the way for the region to
break away from Kyiv in a conflict increasingly out of control.
Western leaders have threatened more sanctions in the key
areas of energy, financial services and engineering if Moscow
disrupts a presidential election planned in Ukraine on May 25.
The reaction in markets has been muted so far, with U.S.
stock futures edging up 0.1 percent and U.S. bond prices
down slightly.
But the latest developments gave investors little reason to
plough into riskier assets.
MSCI’s broadest index of Asia-Pacific shares outside Japan
ticked down 0.1 percent while Japan’s Nikkei
share average was almost flat.
Oil prices rose slightly on concerns about Ukraine, with
U.S. crude futures rising above $100 per barrel.
“Given a dearth of trading factors today, markets will pay
attention to how Kyiv and Moscow will react to the results of
referendum,” said Masafumi Yamamoto, chief strategist at
Praevidentia Strategy.
“There could be military intervention by Russia, or more
armed operations by Ukraine and the West could impose more
sanctions on Russia. These could lead to falls in U.S. bond
yields and the dollar/yen,” he added.
The yen was little changed with the dollar trading at 101.84
yen, having found support around 101.40 last week.
Despite the simmering geopolitical concerns, global shares
rallied last week, with the Dow Jones Industrial average
posting a record closing high on Friday. European shares
hit a six-year high.
“At the end of the day, U.S. corporate earnings will be
little affected by Ukraine. Unless market sentiment drastically
changes, stocks are likely to be supported,” said Takuro
Nishida, deputy manager of investment planning at Nipponkoa
Insurance.
One of the driving forces for stock markets is the prospect
of continued policy support from the Federal Reserve and the
European Central Bank.
Dovish comments from Fed Chair Janet Yellen last week
underpinned risk assets around the globe, including many
emerging market currencies.
European Central Bank President Mario Draghi warned on
Thursday that the euro’s strength was a serious concern and that
the ECB was comfortable with taking more action to support
economic growth.
The euro has been on the defensive since then, and last
traded at $1.3758, not far from the one-month low of
$1.3745 hit on Friday.
There is little in the way of major economic releases on
Monday. On Tuesday, industrial production and retail sales in
China and U.S. retail sales will be closely watched.
(Editing by Shri Navaratnam and Chris Gallagher)