Some analysts say profit taking also driving markets lower
Fears of a further escalation in Ukraine roiled global markets on Friday at the end of what's been a fairly solid week for stocks in the wake of forecast-busting US earnings from the likes of Apple.
Stocks around the world fell sharply as Russia's Foreign Minister Sergey Lavrov accused the West of plotting to control Ukraine, while US President Barack Obama said he will call key European leaders later Friday to discuss what's happened since a deal was reached last week in Geneva to de-escalate the crisis. A further round of sanctions on Moscow appear to be on the table.
Ratings agency Standard & Poor's also downgraded its view on Russia's debt to one notch above so-called junk status and warned that the country "could see additional significant outflows of both domestic and foreign capital from the Russian economy."
The move further weighed on Russian markets and was followed soon by a surprise interest rate increase by the country's central bank. The MICEX index in Moscow was down 0.8 per cent.
"While there may be an element of profit taking driving markets lower today, I think a bigger contributing factor is the recent flare up in eastern Ukraine and the war of words now taking place between the US and Russia," said Craig Erlam, market analyst at Alpari. "We've already seen on numerous occasions what impact this has had on the markets, with even the slightest hint of Russian intervention prompting a flight for safety among investors."
In Europe, the FTSE 100 index of leading British shares was down 0.3 per cent at 6,681 while Germany's DAX fell 1.1 per cent at 9,443. The CAC-40 in France was down 0.5 per cent at 4,458.
Wall Street was poised for a lower opening, with Dow futures and the broader S&P 500 futures down 0.4 per cent. Earlier in Asia, China's benchmark Shanghai Composite Index dropped one per cent to 2,036.52 points while Hong Kong's Hang Seng fell 1.4 per cent to 22,238.06 points. Tokyo bucked the regional trend. Its Nikkei 225 added 0.2 per cent to 14,429.26 pints, rebounding after losing one per cent a day earlier after talks between Prime Minister Shinzo Abe and President Obama failed to produce a trade agreement.