By Chuck Mikolajczak
NEW YORK (Reuters) - European shares and the euro lost ground on Thursday and investors moved to safe-haven government debt after a stronger-than-expected move by Russia to ban certain imports from Europe and the United States.
Early gains on Wall Street faded, with the S&P 500 just below its 100-day moving average, a significant technical support level. More broadly, MSCI's world equity index <.MIWD00000PUS> lost 0.4 percent.
German government debt yields fell to all-time lows, on increased concern over the effect Ukraine's crisis will have on euro zone growth. The European Central Bank said following its monthly policy-setting meeting that a sanctions war could worsen the growth outlook on the continent, where demand is already weak.
The ECB elected to hold borrowing rates at record low levels on Thursday. Europe's main bourses closed lower, with London's <.FTSE> down 0.6 percent, Germany's DAX <.GDAXI> off 1 percent and France's CAC 40 <.FCHI> down 1.4 percent. The move for the DAX put the index down 10 percent from its record closing high in early July. [.EU]
"Geopolitical risks are heightened, are higher than they were a few months ago. And some of them, like the situation in Ukraine and Russia will have a greater impact on the euro area than they ... have on other parts of the world," said ECB head Mario Draghi, in post-meeting comments.
Russia said on Wednesday it would ban all food imports from the United States and all fruit and vegetables from Europe in a stronger-than-expected answer to Western sanctions for Moscow's support for separatists in Ukraine.
German Bunds slid to a record low of 1.069 percent
Gold climbed back above $1,300 an ounce to hit a high of $1,313.60, breaking through technical resistance that could spur further gains, and 10-year U.S. bond yields touched near a two-month low at 2.43 percent
The tensions have, however, aided the ECB's efforts to push down the euro. The shared currency was hovering just above a nine-month low against the dollar
Portuguese stocks <.PSI20>, slumped 2.3 percent, and bonds
U.S. stocks succumbed to concerns over Russia after a higher opening as initial enthusiasm from an unexpected drop in jobless claims dissipated.
The Dow Jones industrial average <.DJI> fell 82.55 points or 0.5 percent, to 16,360.79, the S&P 500 <.SPX> lost 11.5 points or 0.6 percent, to 1,908.74 and the Nasdaq Composite <.IXIC> dropped 20.26 points or 0.47 percent, to 4,334.79.
"Europe traded sharply lower after the ECB press conference. U.S. equities again provided a counterbalance to that risk-off trade by largely maintaining a fairly tight trading range and stability," said Peter Kenny, chief market strategist at Clearpool Group in New York.
"I look at this as the glass half-full, for sure, if you stop to consider the DAX closed in correction territory and we are off incrementally."
As fighting has intensified on the ground in eastern Ukraine, NATO said Moscow had massed around 20,000 combat-ready troops on the Ukrainian border and warned of a possible advance.
Russia's dollar-denominated RTS index <.IRTS>, which is down nearly 9.3 percent over the past three weeks, lost 0.3 percent while its rouble-based MICEX <.MCX> shed 0.1 percent, giving it a 6.3 percent decline over the same period.
U.S. crude
(Additional reporting by Rodrigo Campos; Editing by Nick Zieminski)
