Investors piled into "safe haven" assets this morning, pushing the German 10-year bond yields to a record low after Ukrainian president Petro Poroshenko cancelled a trip to Turkey citing "Russian troop deployments".
In a televised statement, Poroshenko said his "place is in Ukraine", adding that he was calling a meeting of the security council "due to a sharp aggravation of the situation in Donetsk region... as Russian troops were actually brought into Ukraine".
Although Andrey Kelin, the country's ambassador to the Organisation for Security and Cooperation in Europe, denied the claims - and the Kremlin has repeatedly insisted it has not sent troops into Ukraine - markets reacted strongly, sending equities down.
The FTSE 100 fell 0.43 per cent in early afternoon trading, while Germany's Dax fell 1.36 per cent and France's Cac fell 0.76 per cent. Moscow's Micex fell 2.2 per cent. Meanwhile, the ruble fell 1.6 percent to $36.76, its lowest level since the beginning of March, when Russian troops invaded Ukraine's Crimea region.
Investors retreated to assets traditionally regarded as safe, such as German bunds, whose 10-year yields fell to a record low of 0.89 per cent, while the spot gold price rose to $1,295.44 per troy ounce and the Japanese yen rose 0.2 per cent to ¥103.64 to the dollar.