NEW YORK (Reuters) - Growing tension between the West and Russia ahead of Ukraine's weekend referendum in Crimea pushed down stocks on major world markets on Friday and drove up buying of safe-haven gold and the yen.
Financial markets watched nervously as the West increasingly talked about sanctions and Russia hit back with promises of retaliatory measures and displays of military prowess. The vote being held on Sunday by pro-Moscow authorities is to determine if Crimea will join Russia.
Jitters also remained over the degree to which China's economy is slowing after unsettling data this week and China's first corporate bond default.
Stocks posted hefty losses for the week, with the MSCI global market index falling 2.5 percent, its worst weekly decline since June. Gold rose to a six-week high on Friday and gained 3 percent this week.
On Friday, Moscow's MICEX index fell more than 5 percent before recovering to end down 0.9 percent. The rouble was close to recent record lows.
Russia's central bank on Friday kept lending rates on hold after raising them two weeks ago and said it would fight for financial stability after the standoff with the West over Crimea. The bank said there would be no easing of rates in the months ahead, suggesting it expects more tough times ahead for the rouble and for stocks, which have lost about a quarter of their value since mid-February.
Part of the concern over the Crimea referendum on Sunday is that it could encourage other pro-Moscow parts of the country to follow suit and potentially embolden Russia in the region.
"It's the primary drag on equities and risk assets this week because of the uncertainty as to how the events will play out, particularly the referendum this weekend and what the response from the rest of the world and Russia will be to that," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
U.S. Secretary of State John Kerry met Russian counterpart Sergei Lavrov in London in last-ditch diplomatic efforts to defuse tensions, but Moscow and the West appeared increasingly far apart.
Russia shipped more troops into Crimea on Friday and repeated its threat to invade other parts of Ukraine. A German newspaper reported that the chief executive officers of Russia's two largest firms are on a list of those who may be hit next week with European and U.S. sanctions.
U.S. stocks ended lower, and the S&P 500 posted a 2 percent decline for the week, its biggest weekly drop since late January. For the day, the Dow Jones industrial average fell 43.22 points, or 0.27 percent, to 16,065.67, the S&P 500 lost 5.21 points, or 0.28 percent, to 1,841.13, and the Nasdaq Composite dropped 15.023 points, or 0.35 percent, to 4,245.396.
The S&P 500 ended below the key technical support level of 1,850 for a second day.
The FTSEurofirst 300 index of top European shares closed down 0.7 percent. Shares of companies most exposed to Russia fell, including Danish brewer Carlsberg, down 0.5 percent.
Latin American stocks also fell, with Mexico's IPC stock index down 0.2 percent.
Spot gold rose as much as 1.4 percent to its highest level since September 9 at $1,387.90 (833.67 pounds) an ounce early in the session before it later pared gains.
In the foreign exchange market, the latest developments in the Ukraine crisis sent the safe-haven yen soaring against both the dollar and the euro. The yen was headed for its biggest weekly gain in more than a month against the dollar.
The euro fell as much as 0.5 percent against the yen in early U.S. trading before trimming losses to trade 0.25 percent lower at 140.88 yen.
The dollar fell 0.5 percent to 101.36 yen. On the week, the dollar has lost 1.7 percent, which would be its biggest loss since late January.
"I don't think anyone wants to hold any large risky positions going into the weekend," said Shaun Osborne, chief foreign exchange strategist at TD Securities in Toronto.
U.S. Treasuries prices inched up on the Ukraine worries and after data showing low U.S. inflation and a dip in consumer sentiment. The 10-year U.S. Treasury note was last up 1/32 in price to yield 2.647 percent, compared with late Thursday when the yield was at 2.653 percent.
"The demand for Treasuries as a safe-haven security is so overpowering it will be a positive underpinning, even if we see short-term selling on the part of any individual entity," said Margaret Patel, senior portfolio manager at Wells Capital Management in Boston.
U.S. economic data showed consumer sentiment weakened in early March as an unusually harsh winter appeared to dim views on the economy's prospects. [ID:nL2N0MB0JM] The Labor Department, meanwhile, said U.S. producer prices fell in February.
In the oil market, Brent rose more than $1 (60 pence) a barrel ahead of the planned Crimea referendum. The Brent crude oil contract for April delivery, which expired Friday, settled $1.18 (71 pence) higher at $108.57 (65.22 pounds). The May contract, which will become the front month contract on Monday, settled $1.29 (77 pence) higher at $108.21 (65.00 pounds).
Even so, Brent ended lower for a third straight week.
Copper, whose demand is seen falling as Chinese economic growth slows, edged higher on Friday but fell 4.6 percent for the week.
Benchmark three-month copper on the London Metal Exchange, untraded at the close, was bid at $6,468.50 (3,885.45 pounds), up 0.8 percent from Thursday's close. It sank to a 44-month low of $6,376.25 on Wednesday.
Chinese Premier Li Keqiang warned on Thursday that the economy faced "severe challenges" in 2014 while expectations of more debt defaults kept alive worries about the state of its financial sector.
Additional reporting by Clara Denina, Carolyn Cohn in London; Richard Leong and Sam Forgione in New York; Editing by Chris Reese, Leslie Adler and Nick Zieminski