GLOBAL MARKETS-Stocks dip around the world on new Russia sanctions

* Russia assets fall as U.S., EU impose more sanctions

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

* European shares sag after strongest day in three months

(Updates to the open of U.S. trading, changes byline and

dateline, previously LONDON)

By Ryan Vlastelica

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

weakened on Thursday as tighter Western sanctions against Russia

raised the specter of greater geopolitical tensions ahead, while

weak U.S. data gave investors further pause.

Despite those concerns, major indexes were off their lows of

the session, and safe-haven assets like gold and U.S. bonds were

only modestly higher on the day. Crude oil was sharply higher.

The new U.S. sanctions announced late on Wednesday

effectively shut off longer-term dollar funding for companies

close to President Vladimir Putin. European Union leaders agreed

to target Russian firms that help destabilize Ukraine, and to

block new loans to Russia through two development banks.

Such measures had been threatened for weeks, but the

decision to push ahead unsettled investors who had questioned

the appetite to do so, especially in Europe.

Moscow's MICEX stock market fell 2.3 percent, its

dollar-traded cousin, the RTS index, dropped 3.8 percent

and the rouble lost more than 1 percent against both the

dollar and the euro.

"The issue isn't how the sanctions will impact the Russian

economy, but how geopolitical tensions will rise or fall as a

result, and right now it is too soon to tell," said Jonathan

Lewis, chief investment officer at Samson Capital Advisors in

New York.

The sanctions are aimed at tightening pressure on Moscow to

help calm the crisis in Ukraine, where hundreds of people have

been killed in months of fighting between government forces and

pro-Russian separatists.

The Russian Foreign Ministry said it saw the American

sanctions as "a primitive attempt to avenge the fact that

developments in Ukraine are not following Washington's

scenario," and that it was disappointed Europe had "succumbed to

the blackmail of the U.S."

Wall Street stocks were also pressured by a weak read on

U.S. housing starts, which fell well short of expectations in

June, though Morgan Stanley shares rose 1.2 percent after

earnings topped expectations.

The Dow Jones industrial average rose 2.92 points or

0.02 percent, to 17,141.12, the S&P 500 lost 1.22 points

or 0.06 percent, to 1,980.35 and the Nasdaq Composite

dropped 6.25 points or 0.14 percent, to 4,419.72. On Wednesday,

the Dow closed at a new record.

The U.S. 10-year Treasury note rose 8/32 in

price, yielding 2.5088 percent.

"Even without the Russia and Ukraine issue, the housing data

was considerably weaker than expected, pointing to the

fundamentals that continue to support higher bond prices," said

Lewis, who helps oversee about $7.4 billion in assets.

Other safe-haven assets initially rose on concerns that

Moscow, which provides much of Europe's gas, could hit back with

retaliatory measures, though they subsequently moved back

towards breakeven territory. The Japanese yen and Swiss

franc were both little changed, while the U.S. dollar

was flat against a basket of currencies.

The pan-European FTSEurofirst 300 was down 0.4

percent, well off its lows of the day. The MSCI International

ACWI Price Index fell less than 0.2 percent.

Revised euro zone inflation data underscored the need for

the ECB, which has talked about large-scale bond buys, to stay

on its toes, as it remained deep in what Mario Draghi has termed

the sub-1 percent "danger zone."

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Asset returns in 2014 http://link.reuters.com/gap87v

Russia stocks http://link.reuters.com/guv77v

Currencies v dollar http://link.reuters.com/tak27s

ECB rates, inflation and euro http://link.reuters.com/jer39v

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OIL, GOLD CLIMB

The Russia tensions also supported commodities markets, with

U.S. crude futures up 0.9 percent to $102.16 per barrel

and Brent fetching almost $108.

Gold rose 0.4 percent, though it remained near a

four-week low as investors weighed the possibility U.S. interest

rates would rise sooner than expected.

Silver were up 0.5 percent while copper

dipped 0.1 percent.

(Editing by Meredith Mazzilli)