European stocks rebound strongly and prices of top-rated bonds fall as investors breath easier over the crisis in Ukraine that had appeared to escalate dangerously on Friday. But as Ciara Sutton reports no ceasefire agreement has been reached yet despite weekend talks.
It's a crisis with a bumpy road ahead. But one issue at least may have been resolved. Russia and Ukraine have been at loggerheads over this Russian aid convoy carrying water, food and medicine - it's been stranded close to the border for days. Kiev said the trucks could be a way to get weapons to rebels. But following talks between Russia, Germany, France and Ukraine, Russia says the issue has been resolved. Fighting rages on in eastern Ukraine and Russian foreign minister Sergei Lavrov says the situation is a "humanitarian catastrophe" (SOUNDBITE) (Russian) RUSSIAN FOREIGN MINISTER SERGEI LAVROV, SAYING: "We are unable to report any positive results about reaching a ceasefire. The ceasefire is the most pressing issue because people die, the infrastructure is being destroyed daily." But fears of an escalating conflict appear to be diminishing, bringing relief to European markets. They rallied in morning trade after heavy losses last week. Arthur Brunner is from ICF Kursmakler AG. (SOUNDBITE) (German) ARTHUR BRUNNER, FROM ICF KURSMAKLER AG (SECURITIES TRADING BANK), SAYING: "The markets are taking the Ukraine crisis very seriously. The DAX hasn't fully recovered from its Friday losses and the fact that yields on 10 year federal bonds are still under the one percent line shows that the markets here are still unsettled and are still in a wait and see position." Russia, Ukraine and the EU are expected to hold fresh talks over gas and trade worries that run at the heart of the crisis. IG's Alastair McCaig expects less volatility going forward. (SOUNDBITE) (English) ALASTAIR MCCAIG, MARKET ANALYST, IG, SAYING: "Any time sanctions seem to be involved, this tends to be a long term issue, and we can look at many instances around the world on that one. So in reality I think we're going to see this one being debated about for some time to come. Ultimately though I think the longer this takes to progress, the calmer the markets reactions will be." Germany's DAX lost over 10 percent between late June and early August amid fears that the conflict between the West and Moscow could derail Europe's fragile recovery. Germany's central bank says the euro zone economy is expected grow slower than expected this year as the conflict - and others - weigh on business confidence.