London Report: Syria weighs on FTSE amid oil trade scramble

THE UK’S top share index fell yesterday, 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 10.91 points, or 0.2 per cent, at 6,430.06 points at the close 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 4.5 per cent, while easyJet dropped 1.8 per cent.

However, the index pared losses towards the close after US 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 two per cent.

The FTSE 100 has fallen some three per cent since mid-August on concerns over a reduction in US monetary stimulus and over Syria, and is just 0.7 per cent 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 US stocks.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 yesterday.

GFT Markets analyst Fawad Razaqzada sounded a note of caution about the UK benchmark, which failed to break above 6,500 last week, and “until this is put right, the path of least resistance remains on the downside”.