GLOBAL MARKETS-Stocks pare losses, dollar falls after Biden defuses tenions over Poland blast
Updates throughout; changes dateline and byline
By Amanda Cooper
LONDON, Nov 16 (Reuters) - Global stocks pared losses and the dollar fell on Wednesday after U.S. told G7 and NATO partners that a missile blast in Poland was caused by a Ukranian defence missile, dispelling fears that it originated from Russia.
Initial relief among investors was enough to encourage some flows back into equities and commodities, but with concern still simmering over the chances that the Ukraine conflict could spill into countries, risk assets struggled to gain much upward momentum.
The MSCI All-World index .MIWD00000PUS was virtually unchanged on the day, having fallen by as much as 0.2% overnight when of the explosion, which killed two people, broke.
"The core belief is still this isn't going to cause an escalation. This is whatever it was, but it was an attack on Poland and Biden’s comments took the tension out of it," Societe Generale strategist Kit Juckes said.
When the missile struck, NATO member Poland first said a Russian-made rocket was responsible and summoned Russia's ambassador to Warsaw for an explanation after Moscow denied it was responsible.
The dollar, which acts a safe haven in times of geopolitical or market turmoil, rallied as much as 0.7% overnight, before tracking lower in European trading and was last down 0.3% against a basket of major currencies =USD.
"The initial reaction was understandable given that any deliberate strike on a NATO member would mark an enormous escalatory step," Deutsche Bank strategist Jim Reid said.
"It soon became apparent that this was highly unlikely to be a direct attack, and the overnight comments mentioned at the top suggest a rapid de-escalation."
Biden said the United States and its NATO allies werebut early information suggested it may have been caused by a missile fired from Russia.
European shares slipped, with the STOXX 600 .STOXX down 0.1%, while Germany's DAX .GDAXI dropped 0.7% and Britain's FTSE 100 .FTSE rose 0.3%.
U.S. stock futures edged higher, with S&P 500 e-minis ESc1 and Nasdaq 100 futures NQc1 both up 0.1%.
The euro EUR=EBS was last up 0.6% on the day at $1.0411, while sterling GBP=D3 was roughly flat at $1.1865, after UK data showed consumer inflation picked up by a lot more than expected in October.
With geopolitical tensions injecting some volatility into the broader markets, benchmark 10-year Treasury yields US10YT=RR were almost unchanged on the day at 3.807%. On Tuesday, yields fell to their lowest in over a month. US/
Gold GCc1 rose 0.2% on the day to $1,776 an ounce, buoyed by a weaker dollar, while crude oil LCOc1 rose 0.3% to $94.07 a barrel, having fallen to an overnight low of $92.85. GOL/ O/R
(Additional reporting by Xie Yu; Additional reporting by Ankur Banerjee; Editing by Edwina Gibbs, Edmund Klamann & Simon Cameron-Moore)
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