By Richard Leong
NEW YORK (Reuters) - Stock markets around the world fell on Thursday after Ukraine said Russia had moved more troops into the country, deepening the regional crisis, as nervous investors shifted money into gold and U.S. and German government bonds.
The euro hit a 21-month low against the Swiss franc and fell against the yen as worries about intensified fighting between the Ukrainian military and pro-Russian separatists in eastern Ukraine drove investors to seek safe-haven currencies.
Ukrainian President Petro Poroshenko said Russian forces had entered Ukraine, and he convened his security and defense council to decide how to respond. Russia's defense ministry denied that Moscow had dispatched troops into Ukraine.
"Geopolitics is driving the market again, and this latest escalation in Ukraine comes as European stocks were ripe for a pull-back," said Alexandre Baradez, chief market analyst at IG France in Paris.
The tensions dragged down European equities and share prices in other markets, with the S&P 500 index <.SPX> retreating below the 2,000 threshold following a record close on Wednesday.
The Dow Jones industrial average <.DJI> closed down 41.35 points, or 0.24 percent, at 17,080.66, the S&P 500 <.SPX> ended 3.25 points, or 0.16 percent lower, at 1,996.87 and the Nasdaq Composite <.IXIC> finished down 11.93 points, or 0.26 percent, at 4,557.70. [.N]
The pan-European FTSEurofirst 300 index <.FTEU3> snapped its three-day winning streak, closing 0.6 percent lower at 1,369.33 points. Tokyo's Nikkei <.N225> ended down 0.5 percent at 15,459.86.
The MSCI world equity index <.MIWD00000PUS>, which tracks shares in 45 nations, fell 1.56 points, or 0.36 percent, to 430.69.
Meanwhile, 10-year German Bund yields hit a record low of 0.868 percent, and 30-year U.S. bond yields touched 3.059 percent, the lowest in 14 months.
Bond yields worldwide have fallen in recent days as traders bet that the European Central Bank would unveil new stimulus as soon as next week in a bid to avert deflation in the euro zone.
German inflation for August came in at a steady 0.8 percent ahead of Friday's euro zone number. Corresponding Spanish figures saw a slightly smaller-than-forecast drop as revised second quarter GDP held steady.
The weak inflation readings overshadowed an upwardly revised U.S. second-quarter economic growth reading.
In the currency market, the euro fell 0.3 percent to 136.71 yen and nearly 0.1 percent versus the Swiss franc to 1.2060 francs after hitting a 21-month low of 1.2050 francs.
The dollar reversed earlier losses against most major currencies in the wake of the GDP upgrade and Wall Street paring its earlier decline. The dollar index <.DXY> clung to a mild 0.04 percent rise to 82.46.
Safe-haven demand pushed spot gold prices higher for a third consecutive day, rising 0.6 percent to 1,290.00 an ounce.
London oil prices finished lower but held above their recent 14-month lows on short-term supply concerns. Brent crude for October delivery settled down 26 cents, or 0.25 percent, at $102.46 a barrel, while U.S. crude futures settled up 67 cents, or 0.71 percent, at $94.55 per barrel.
(Additional reporting by Karen Brettell in New York; Marc Jones, Sujata Rao and Marius Zaharia in London; Editing by John Stonestreet, Meredith Mazzilli and Paul Simao)