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People are reflected on an electronic board displaying Japan's Nikkei average outside a brokerage in Tokyo on Aug. 11, 2014. (Toru Hanai/Reuters)
People are reflected on an electronic board displaying Japan's Nikkei average outside a brokerage in Tokyo on Aug. 11, 2014. (Toru Hanai/Reuters)

Premarket: Stocks rebound as Ukraine tensions simmer Add to ...

Global stocks bounced after recent sell-offs and core government debt prices fell on Monday as markets saw a lowered risk of direct conflict between Russia and Ukraine while Middle East tensions appeared less acute.

The MSCI World Index, which tracks stocks from developed economies, was up 0.4 per cent in early trading – though still down 3.9 per cent from July highs as the prevailing market mood remained a cautious one.

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The pan-European FTSEurofirst 300 index followed Asia up 1 per cent.

Both regions followed Wall Street’s surge on Friday after Russia said it had finished military exercises close to the Ukrainian border, which the United States had criticised as provocative.

The Ukraine crisis has hit European markets particularly hard with the German blue-chip DAX index down 9.5 per cent from its June peak, luring investors looking for attractively priced entry points into European equities.

“Fears over the conflict between Ukraine and Russia have receded for now, which is helping the market recover some ground,” said Arnaud Scarpaci, fund manager at Montaigne Capital in Paris, saying that the recent “But this is mostly a technical bounce which should last just a few days.”

The increased appetite for risk led to a modest drop in safe-haven bonds, with German Bund futures slightly down. The dollar edged up 0.1 per cent against a basket of six major currencies.

The cautious mood extended to the market’s assessment of events in the Middle East, with investors keeping an eye on political infighting in Iraq and talks in Cairo between Israel and the Palestinians on ending the month-old Gaza war.

“There has been a slight easing in [global] geopolitical tensions but the underlying situation ... remains fragile,” said Nick Stamenkovic, bond strategist at RIA Capital Markets.

Emerging markets also got a boost, with the MSCI Emerging Market index up 1.1 per cent, as Russian stocks rose more than 2 per cent while the rouble rose against the dollar.

Investors also took Turkish Prime Minister Tayyip Erdogan’s victory in the country’s first direct presidential election on Sunday as a sign of stability, at least in the short term.

U.S. crude oil and Brent crude futures were broadly flat, with the former ticking up at $97.65 (U.S.) per barrel and the latter ticking down at $104.93.

“It’s very early to start celebrating and you’ve still got the negative effects of the sanctions [against Russia], which are likely to filter through over the coming months,” said Michael Hewson chief market analyst at CMC Markets UK.

“But anything that ratchets down the tension is always going to be an opportunity to take profit on the shorts and maybe doing a little bit of bargain hunting.”

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