GLOBAL MARKETS-Malaysian air crash amplifies move to safer assets

* Crash of Malaysian airliner sparks risk-aversion

* Russian assets fall on U.S., EU sanctions

* U.S. housing starts weak; Morgan Stanley (Xetra: 885836 - news) results up

(Updates prices, adds context)

By Ryan Vlastelica

NEW YORK, July 17 (Reuters) - Stock markets around the world

on Thursday were sharply lower and safe-haven investments like

gold and government bonds rose after news a Malaysian airlines

jet was shot down over eastern Ukraine near the Russian border.

Almost 300 people died in the crash, caused by a missile

fired at the plane, according to a Ukrainian official. The

incident follows an increase in tensions between Ukraine and

Russia that has resulted in clashes along the border, including

the targeting of military aircraft also.

The crash stoked concerns that the conflict in Ukraine might

widen after U.S. sanctions against Russia were announced late

Wednesday.

The Russian rouble fell 1.8 percent against the U.S.

dollar, its biggest one-day decline since June 2013. Major

European stock indexes fell just before the close of trading.

Moscow's MICEX stock market fell 2.3 percent and its

dollar-traded related index, the RTS index, dropped 3.8

percent.

"We started the day on an unstable geopolitical situation...

then out of the blue you get this tragedy," said Art Hogan,

chief market strategist at Wunderlich Securities in New York.

"The market, we know, doesn't like uncertainty and that is what

it's facing right now."

The report sparked a shift to safe-haven assets such as U.S.

government bonds. The benchmark U.S. 10-year Treasury note

rose 15/32 in price, dropping the yield to 2.482

percent, not far from the 2014 low of 2.438 percent.

Gold prices jumped more than 1.5 percent in their

biggest one-day advance in about a month. Silver prices

rose 2.0 percent.

However, analysts expected the market impact of the crash to

be short-lived.

"For a sustained sub-2.50 percent on the 10-year yield, we

need another catalyst to support the idea the economy is not as

strong as some people think," said Anthony Valeri, fixed income

strategist at LPL Financial (NasdaqGS: LPLA - news) in San Diego.

Wall Street stocks hit session lows after the aircraft

crash, but have since recovered some losses.

Stocks of airline companies were especially hit hard, with

the NYSE Arca Airline Index dropping 1.3 percent.

The Dow Jones industrial average fell 49.7 points or

0.29 percent, to 17,088.5, the S&P 500 lost 10.11 points

or 0.51 percent, to 1,971.46 and the Nasdaq Composite

dropped 32.39 points or 0.73 percent, to 4,393.58.

European shares ended their session near their lows of the

day. The pan-European FTSEurofirst 300 was down 1.0

percent and the MSCI International ACWI Price Index

increased losses to 0.5 percent.

The Japanese yen rose 0.4 percent against the dollar,

while the Swiss franc was little changed and the U.S.

dollar was flat against a basket of currencies.

U.S. crude futures rose 1.5 percent to $102.72 per

barrel.

Prior to the report of the crash, Wall Street stocks edged

lower on a weak read on U.S. housing starts, which fell well

short of expectations in June.

Investment bank Morgan Stanley reported results that

topped expectations, but the stock pared its early advance to

trade at breakeven levels.

(Editing by Clive McKeef)