Stocks diverge on fears of Ukraine-Russia escalation

Stock markets fell in Europe and were mixed on Wall Street as fears of escalation of Russia's war against Ukraine prompted investors to retreat.

Moscow vowed to react "accordingly" after saying Ukraine had fired its first US-made long range missile onto Russian territory after being cleared to do so by US President Joe Biden.

"The news rattled markets this morning, driving European stocks lower and reinforcing bearish momentum" against the euro, said Fawad Razaqzada, market analyst at Forex.com .

"We are getting close to very dangerous territories," he said.

US shares fell at the opening but then clawed back some of their losses, lifted by strong guidance from retailer Walmart and expectations of positive earnings from chip-maker Nvidia.

The Dow Jones index was lower, the wider S&P 500 little changed and the tech-heavy Nasdaq higher in late morning trading.

All the main indexes in Europe closed in the red, though off their lows for the day.

Still, it was a marked reversal of the optimism seen on Wall Street on Monday, when stocks shrugged off uncertainty over Donald Trump's tariff plans to push higher, with the momentum carrying over into the Asian trading day.

"Caution returned early Tuesday, this time as events thousands of miles from Wall Street raised geopolitical risk concerns," said Joe Mazzola, a strategist at Charles Schwab.

Hong Kong and Shanghai in particular closed higher on hopes China will unveil more stimulus aimed at kickstarting its economy and property sector in particular.

On the corporate front, retail giant Walmart jumped 4 percent as it boosted guidance ahead of what it sees as a positive Christmas season.

Nvidia was up almost three percent. The AI chip giant, often seen as a bellwether stock for technology sector, reports its quarterly earnings after the market closes Wednesday.

In Europe, shares in German industrial giant Thyssenkrupp rose almost 12 percent after the group said it expected a return to profit in its next financial year - despite posting a hefty full-year loss for the second year in a row.

Nestle slid two percent after new chief executive Laurent Freixe announced a plan to slash costs and have a standalone water and beverages business.

Equities have seen big swings since Trump was elected US president this month, as investors balance the impact of corporate tax cuts against a potential trade war with China and others.

Any resulting surge in inflation would give a headache to policymakers at the US Federal Reserve who are still fighting to bring prices under control.

The potential inflationary impact of Trump's threatened tariffs has boosted US bond yields and led traders to scale back their bets on how many more interest-rate cuts the Fed will announce in the coming year.

Oil prices were little changed as traders balanced concerns about the Ukraine war with the more reassuring news that Iran is taking steps to halt expanding its stockpile of enriched uranium.