Russian markets open flat as NATO escalation fears fade

LONDON, Nov 17 (Reuters) - Russia's financial markets were steady at the start of trading on Thursday, after Western leaders moved to cool escalation fears, saying a missile that killed two people in Poland was most likely a stray from Ukraine's air defence system.

Russian stocks saw volatile trade on Wednesday as the West scrambled to investigate the cause of the missile hit, with NATO holding an emergency meeting. But the Kremlin praised Washington's "restrained" response to the incident and Russian markets quickly recovered initial losses.

At 0650 GMT on Thursday, the Russian rouble was down 0.1%against the U.S. dollar at 60.4 and had gained 0.2% against the euro to trade at 62.75.

Russian stock indexes were mixed at the start of trading in Moscow. The dollar-denominated RTS index was down 0.1% to 1,162.9 points. The rouble-based MOEX Russian index was 0.1% higher at 2,228.6 points.

Analysts said traders were putting the incident in Poland behind them, and the Russian stock market was now likely trading in response to global commodity prices and fears of a worsening COVID outbreak in China, capping any potential upside.

"The main reason for the lack of continued growth is the weakness of the commodity market, which turned downwards on the deterioration of the COVID situation in China. This morning, base metals and oil are trading in the red zone - which will again hold back the stock market," analysts at Moscow-based Alor Broker said in a research note.

Against the Chinese yuan - an increasingly important currency pair for Russia - the rouble was 0.4% stronger at 8.461

Brent crude oil, a global benchmark for Russia's main export, was down 0.7% at $92.22 a barrel.

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For Russian treasury bonds see (Reporting by Reuters Editing by Mark Potter)