* FTSEurofirst 300 closes down 0.3 percent at 1,198.56
* Western forces prepare for air strikes against Assad
* Tensions, oil price rises hit travel firms
* Energy shares benefit from rising cost of oil
By David Brett
LONDON, Aug 28 The risk of an attack by Western
powers on Syria contributed to falls in European shares on
Wednesday with travel stocks bearing the brunt of investor
concerns, but a spike in oil prices boosted energy suppliers.
The FTSEurofirst 300 was down 3.80 points or 0.3
percent at 1,198.56, finding technical support around 1,192,
having broken below the 50-day moving average.
Germany's Dax too found technical support around
8,150 - its 100-day moving average.
The prospect of a U.S.-led attack on Syria, possibly within
days, has raised concerns about the impact on the broader
Kevin Gardiner, head of investment strategy in Europe at
Barclays Wealth, said in the short term the geopolitical
backdrop would be difficult to trade because there are too many
"Short-term volatility would be the best way to play it," he
The cost of buying options to protect against future market
swings, as measured by the Euro STOXX 50 volatility index
or VSTOXX, jumped to a 1-1/2 month high of 22.3 points.
The conflict in Syria has contributed to investors cashing
in an 8 percent rally in European stocks since late June and
purchasing traditional safe-haven assets such as government
bonds and gold, while the oil price has spiked on supply
Societe Generale said the North Sea crude oil benchmark
could surge as high as $150 per barrel if the war affects oil
producers such as Iraq.
Travel & leisure stocks fell 1.4 percent, led by
airlines such as Lufthansa. On Tuesday, Investec said
in a note that prices above $100 a barrel were a severe headwind
to airlines' profitability.
The threat of the conflict spreading throughout the Middle
East also hit tour operators which sell holidays in the region
with Tui down 0.7 percent.
Cautious guidance from Europe's largest hotel operator,
Accor, which fell 4.4 percent, also weighed on the
The jump in crude prices, however, boosted heavyweight oil &
gas stocks, which rose 2.4 percent, and helped
marginalise wider index losses.
International gas and oil producer BG Group jumped
4.7 percent, while Norway's Statoil rose 4.2 percent,
helped by a new discovery.
"Energy in particular is a relevant sector given the ...
spike in geopolitical concerns," Robert Parkes, a strategist at
HSBC, said. "That is a sector that investors have shunned and
valuations stand at a pretty attractive level."
The energy sector was trading at 9.3 times its expected
earnings for the next 12 months, the lowest valuation multiple
in Europe, Datastream data showed. Along with utilities and
telecoms, it was among the few sectors trading below their
10-year average multiples.
Away from the oils, Bouygues rallied 10.4 percent,
reversing recent losses, after the French
construction-to-telecom conglomerate confirmed its profit
outlook and said earnings at its troubled telecom unit would
stabilise this year.
The FTSEurofirst 300 is still up 5.3 percent in 2013 but has
pulled back 3.9 percent since mid-August due to an expected
reduction in U.S. monetary stimulus, a political crisis in Italy
and now the escalating crisis over Syria.
"There is profit taking here and people are trying to
protect their portfolio ... as a tactical element because they
have performed quite well year to date," said Sergio Trezzi,
head of retail sales and client service for continental Europe
at Invesco, which manages assets worth $730 billion.
"But when you look at the (six- to 12-month) strategic asset
allocation, I don't believe the turmoil we're seeing right now
will change (it)."
A fund selector survey by Invesco found 44 percent of
respondents plan to increase their exposure to European equities
over the next 12 months, more than for any other asset class.