Asian stocks stall as Ukraine sours mood, dollar sags

By Shinichi Saoshiro

TOKYO (Reuters) – Asian stocks stalled and the dollar sagged against the safe-haven yen on Monday, as another bout of tensions in the Ukrainian conflict sapped investor confidence.

Spreadbetters are picking European shares, which already had a chance on Friday to absorb renewed tensions in the Ukraine, to fare better. They forecast Britain's FTSE to open as much as 0.4 percent higher, Germany's DAX 0.8 percent and France's CAC 0.6 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan was effectively flat, treading water through most of the day. The index had gained 2.5 percent last week, its largest weekly rise in nearly five months.

Tokyo's Nikkei inched up 0.1 percent.

News late on Friday that Ukrainian forces said they had destroyed a Russian military column in Ukrainian territory initially hit Wall Street, drove down government bond yields and boosted safe-haven currencies such as the yen and Swiss franc.

U.S. stocks eventually pared their losses as risk appetite partially returned, giving Asian shares an a token lift early on Monday.

Still, with the four-month conflict reaching a critical phase over the weekend – Kiev and Western governments are nervously watching if Russia will intervene in support of the increasingly besieged rebels in eastern Ukraine- risk appetite was subdued.

"A feeling of complacency had been creeping back into investor psychology last week with a general feeling that perhaps the declines at the start of the month were overdone," Jasper Lawler, market analyst at CMC Markets, said in a note to clients.

"The encounter in Ukraine was a hefty reminder that geopolitics cannot be ignored," he said.

The dollar dipped slightly to 102.31 yen after sliding from a 10-day peak of 102.72 on Friday.

The euro was flat, at $1.3393 having being lifted from an intraday low of $1.3359 on Friday as the greenback was hit by a sharp fall in Treasury yields.

The benchmark 10-year Treasury yield dropped to as low as 2.30 percent on Friday, lowest since June 2013, in wake of the Ukraine news. It yielded 2.355 percent on Monday.

Apart from geopolitics, currency and bond markets will be focused on the Aug. 21-23 annual meeting of top central bankers at Jackson Hole, Wyoming, for possible clues about the path for monetary policy in the months ahead.

"Historically, trading leading into Jackson Hole sees increased volatility," noted Evan Lucas, strategist at IG in Melbourne.

"Talk so far is that chairperson Yellen is concentrating on employment and the composition of wage growth and full-time versus part-time percentages; this issue is likely to be echoed by central bankers around the world as global employment remains soft at best."

In commodities, Brent crude fell below $103 a barrel as Libya increased its oil output and as worries over supply from key producer Iraq eased.

Brent crude was down 82 cents at $102.71 a barrel after jumping more than $1 on Friday on tensions in the Ukraine.