FTSE drops, pressured by Syrian risks

1 of 3. A trader monitors the screen on a trading floor in London January 22, 2010.

Credit: Reuters/Stefan Wermuth

By Alistair Smout

LONDON | Wed Aug 28, 2013 4:25pm BST

LONDON (Reuters) - The FTSE 100 fell on Wednesday, pressured by the risks of possible Western military action against Syria, but with energy stocks supporting the market after an oil price spike.

The FTSE 100 was down 12.40 points, or 0.2 percent, at 6,428.57 points by 1440 GMT, as the United States and its allies appeared to be gearing up for a strike against Syria, pushing oil prices to multi-month highs on concerns about Middle Eastern crude supply.

Falls were seen across the board, with the rising oil price increasing costs for companies in a still-fragile economy. Airline IAG was the biggest FTSE faller, down 4.4 percent, while easyJet dropped 1.7 percent.

However, the index pared losses towards the close after U.S. markets opened higher. Thierry Laduguie, stock market analyst at e-Yield, said the market was now factoring in that intervention would take place.

"A U.S. strike on Syria would push oil higher but I am not sure it would have a big impact on stocks," he said.

"Investors anticipate a strike, this is already priced in"

Heavyweight energy stocks BP and Royal Dutch Shell were among the top FTSE 100 risers, with respective gains of 1.2 percent and 2 percent.

The FTSE 100 has fallen some 3 percent since mid-August on concerns over a reduction in U.S. monetary stimulus and over Syria, and is just 0.2 percent off setting a two-month low.

"There's not just Syria ... with possible tapering at the next Fed meeting and the German election in September, people are stepping aside or buying protection," Ioan Smith, managing director at KCG, said.

Stock market reaction was mixed after new Bank of England governor Mark Carney recommitted to an extended period of lower rates and said he could pump more money into the British economy. Stocks initially pared losses then fell to an intraday low, before rallying in tandem with U.S. stocks.

NEXT WAVE DOWN

The FTSE 100 remained trapped in a recent range, and charts indicated there could be future falls even if worries over Syria subside.

"On the daily chart the index is below the 50-day moving average and above the 200-day moving average, the directional movement index has given a sell signal. Any rally should lead to the next wave down," e-Yield's Laduguie said.

Stocks trading without the attraction of their latest dividend, including CRH, Glencore Xstrata and Legal & General, took 2.3 points off the FTSE 100 on Wednesday.

(Editing by Ruth Pitchford)

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