European stocks rebound following last week’s losses

European stocks rebounded strongly and prices of top-rated bonds fell today as investors breathed easier over the crisis in Ukraine, which had appeared to escalate dangerously last week.

On Friday, the government in Kiev said its artillery had partially destroyed a Russian armoured column, while Russia denied its forces had crossed into Ukraine.

Fears Friday’s clash could have prompted a military response from Moscow proved unfounded, though fighting between Ukrainian forces and pro-Moscow separatists continued. Kiev said yesterday its troops had raised the national flag over a police station in the rebel stronghold of Luhansk.

The pan-European FTSEurofirst 300 stock index was 1.3 per cent higher, reversing Friday’s losses. Germany’s Russia-exposed Dax index added 1.7 per cent. Russian shares and the rouble also firmed. Asian shares traded broadly flat. MSCI’s main measure of Asia-Pacific shares outside Japan was down 0.03 per cent.

Wall Street initially took a hit on Friday after the report of the attack on the Russian column but later pared losses. The Dow Jones Industrial average, which briefly turned negative for the year, and S&P 500 indexes both fell but the tech-heavy Nasdaq rose.

Brent crude oil prices fell more than $1 to trade below $103, erasing a similar rise on Friday blamed on the Ukraine tensions and as Libya, another trouble spot, increased supply.

Yields on US Treasury bonds, often sought at times of heightened tension, fell on Friday. Ten-year bonds hit 2.34 per cent, their lowest since mid-June 2013, but traded above 2.36 per cent today. Yields on German 10-year debt, the euro zone benchmark, rose 1.9 basis points to 0.994 per cent, still close to record lows.

In currency markets, the euro was less than 0.1 per cent down at $1.3388, still close to a nine-month low of $1.3333 hit on Aug. 6. The dollar edged up to 102.47 yen.

Reuters