GLOBAL MARKETS-Stocks fall as Kerry speaks on Syria; bonds rise

Fri Aug 30, 2013 2:05pm EDT

* Dollar remains near 4-week high
    * U.S. shares fall as Kerry talks of punishing Syria
    * Oil and gold still fall amid uncertainty


    NEW YORK, Aug 30 (Reuters) - Stocks fell and U.S. Treasury
prices rose on Friday after Secretary of State John Kerry made a
televised address making it clear that the United States will
punish Syrian President Bashar al-Assad for a chemical weapons
attack on civilians.  
    The remarks stoked concerns that the U.S. was ready to
launch a military strike and added to a subdued tone of trading
ahead of a three-day U.S. holiday weekend, particularly on the
back of limp data on U.S. consumer income, spending and
inflation.
     Arguing that it was essential to show those who would use
chemical weapons in future that the world will not let Syria get
away with it, Kerry said the United States was joined by the
likes of France, "our oldest ally," in its determination to
respond to the attack, which he said killed more than 1,400
people in Damascus last week.
    Those concerns about a U.S. military strike made investors
reluctant to short safe-haven U.S. debt and helped send the
dollar to a four-week high. 
    "People are uneasy not knowing what's going on, and it will
probably be in the background at least so long as it continues,"
John Carey, portfolio manager at Pioneer Investment Management
in Boston, which has about $200 billion of assets under
management. "Syria isn't the crisis in and of itself, but if we
do take military action, there could be repercussions that will
hurt us. You never know, with military action, the kind of
consequences you'll see. It's always very risky."
    U.S. stocks slipped, with the S&P 500 index likely to end
August with its worst monthly showing in over a year. The market
tone was already set by reports showing U.S. consumer spending
barely rose, up 0.1 percent, and inflation was tame in July,
with a price index for consumer spending edging up 0.1 percent.
 
.
    The Dow Jones industrial average was down 26.00
points, or 0.18 percent, at 14,814.95. The Standard & Poor's 500
Index  was down 4.04 points, or 0.25 percent, at
1,634.13. The Nasdaq Composite Index  was down 24.57
points, or 0.68 percent, at 3,595.73.
    The 10-year yield eased to 2.755 percent. 
    The dollar index, which measures its value against
six major currencies, was at 82.060 not far from a four-week
high of 82.263 touched earlier in the day.
    Among emerging currencies, the Indian rupee has
tumbled 10.4 percent against the dollar so far this month, and
looks to be heading for its largest monthly fall ever, according
to Thomson Reuters data. {ID:nL20GV12L]
    India is seeking support from other emerging market
countries for a coordinated intervention in offshore foreign
exchange markets after a currency rout the past three months,
but at least one critical partner, Brazil, said it is not
involved in such planning at this time..
    Most major equity markets and many emerging currencies
looked set to end the week and the month sharply lower as
investors pull out of riskier assets in anticipation of the Fed
action and some form of Western intervention against Syria.
    The growing caution was reflected in a Reuters asset
allocation poll of 54 fund managers across the United States,
Europe and Japan. It showed investors had increased cash
holdings to their highest level in a year, while also lifting
exposure to equities and cutting bond positions. 
     
    SYRIA 
    Fears of a broader conflict in the Middle East eased
slightly after Britain said it would not join any military
action, although France said it still supported a move to punish
Syrian President Bashar al-Assad's government for an apparent
poison gas attack on civilians. 
    But that easing of concern didn't last even as Russia and
China remained opposed to any move and China cautioning against
any U.N. Security Council action until the investigation is
complete. 
    Brent crude oil fell below $115 a barrel, off highs of $117
set earlier this week when military action seemed imminent
. U.S. crude was down US$1.12 to $107.67.
    "The situation is still volatile," said Alex Yap, an analyst
at energy consultancy FGE in Singapore. "If the U.S. decides to
attack, prices could be pushed higher."
   
    
    GRIM MONTH
    MSCI's world equity index, which tracks
shares in 45 countries, fell 0.3 percent on Friday, heading for
its worst week since June 21. 
    European shares felt the pressure from a drop in oil stocks
with the broader STOXX Europe 600 index down 0.9
percent, taking its weekly losses to around 2.4 percent. 
    Earlier, Japan's Nikkei lost 0.5 percent despite new
data that painted a brighter economic picture. 
    In other commodity markets, gold fell 0.8 percent to
below $1,400 an ounce, moving away from a 3-1/2 month high hit
Wednesday when fears over Syria prompted a flight to safety.