GLOBAL MARKETS-Stocks, bond yields fall as Ukraine crisis deepens

* S&P 500 index sinks below 2,000 after record close

* Traders focus on weak European data, brush off upbeat U.S.

GDP

* Bund yields hit new lows, U.S. 30-year yield lowest in 14

months

* Gold (Other OTC: GDCWF - news) rises 3rd day on safe-haven bids, oil prices steady

(Updates market action, changes dateline, previous LONDON)

By Richard Leong

NEW YORK, Aug 28 (Reuters) - Stock markets around the world

fell on Thursday after Ukraine said Russia moved more troops

into the country, escalating the risk of the region's crisis

spreading, as nervous investors shifted money into gold and U.S.

and German government bonds.

The euro hit a 21-month low against the Swiss franc and fell

against the yen as worries about intensified fighting between

the Ukrainian military and pro-Russian separatists drove

investors to seek safe-haven currencies.

Ukrainian President Petro Poroshenko said Russian forces had

entered Ukraine, and he convened his security and defense

council to decide how to respond.

"Geopolitics is driving the market again, and this latest

escalation in Ukraine comes as European stocks were ripe for a

pull-back," said Alexandre Baradez, chief market analyst at IG

France.

The tensions put riskier assets firmly under pressure with

the Standard & Poor's 500 index falling below the 2,000

threshold following a record close on Wednesday.

In midday U.S. trading, The Dow Jones industrial average

fell 52.24 points, or 0.31 percent, to 17,069.77, the S&P

500 shed 3.99 points, or 0.2 percent, to 1,996.13 and the

Nasdaq Composite declined 10.15 points, or 0.22 percent,

to 4,559.47.

The pan-European FTSEurofirst 300 index snapped

its three-day winning streak, falling 0.7 percent at 1,369.15

points. Tokyo's Nikkei closed down 0.5 percent at 15,459.86.

The MSCI world equity index, which tracks

shares in 45 nations, fell 1.81 points or 0.42 percent, to

430.44.

Meanwhile, ten-year German Bund yields hit a

record low of 0.868 percent, and 30-year U.S. bond yields

touched 3.059 percent, the lowest in 14 months.

Bond yields worldwide have fallen in recent days as traders

bet on new stimulus from the European Central Bank as soon as

next week in a bid to avert deflation in the euro zone.

German inflation came in at a steady 0.8 percent ahead of

Friday's euro zone number. Corresponding Spanish figures saw a

slightly smaller-than-forecast drop as revised second quarter

GDP held steady.

These weak inflation readings overshadowed an upwardly

revised U.S. second-quarter economic growth reading.

In the currency market, the dollar and euro softened against

safehaven yen, though the greenback retraced much of its earlier

decline on the surprise upward GDP revision.

The dollar was down 0.05 percent to 103.79 yen but

flat against the Swiss franc at 0.9148 franc.

The euro fell 0.3 percent to 136.62 yen and

declined 0.1 percent versus the Swiss franc to 1.2055 francs

, close to a 21-month low.

Safe-haven demand pushed spot gold prices higher for a third

day, rising 0.5 percent at 1,289.50 an ounce.

London oil prices held above their recent 14-month lows on

short-term supply concerns. Brent crude for October

delivery was last up 19 cents or 0.18 percent at $102.91 a

barrel, while U.S. crude futures were up 72 cents or 0.77

percent, at $94.60 per barrel.

(Additional reporting by Karen Brettell in New York; Marc

Jones, Sujata Rao and Marius Zaharia in London; Editing by John

Stonestreet and Meredith Mazzilli)