JUN 20 - The deployment of military advisers signals the US's growing concern at Iraq - but are investors taking the situation seriously? David Pollard reports.
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Patrol duty on the streets of Baghdad. It can be a lonely business. Soon soldiers like these will have some extra help. Three hundred U.S. military advisers are being sent there. Not, though, U.S. troops. SOUNDBITE (English) U.S. PRESIDENT BARACK OBAMA SAYING: ''American forces will not be returning to combat in Iraq.'' No air strikes now - but later possibly. And the U.S. president says Iraq's government should set a political agenda for Sunni, Shi'ite and Kurd alike. Something many Iraqis are desperate to see. SOUNDBITE (Arabic) IRAQI CITIZEN, AHMED, SAYING "It can't be solved through military intervention, it has to be solved through diplomatic and political channels. That's our message to Obama.'' But is the message for markets getting through clearly enough? There certainly are those who are worried. For Somerset Capital Management's Dominic Johnson, the region is in dangerous flux. SOUNDBITE (English) DOMINIC JOHNSON, CHIEF EXECUTIVE, SOMERSET CAPITAL MANAGEMENT, SAYING: ''That is problematic for policymakers and it's very difficult for business people to try and assess what happens next because you've lost all sense of stability and direction, and ultimately, you know, these are very dangerous times. So whilst economically, I'm relatively benign about much of the world, politically I've never been more concerned.'' His view could be the minority, according to Reuters markets analyst Neal Kimberley. SOUNDBITE (English) NEAL KIMBERLEY, REUTERS FOREX ANALYST, SAYING: I think the wider market's dramatically underestimating the importance of what's happening in the Middle East. This is not just a localised affair in Iraq. There is potential here for sectarian overspill. Bagdhad's blaming Riyadh, Riyadh's saying 'we don't want foreigners getting involved' despite the fact that half of ISIS have come from foreign countries. It's potentially very, very messy and I think the oil price could have more upside.'' So far, that upside's been quite limited. Though corporates beware, says Andrea Williams from RLAM. SOUNDBITE: ANDREA WILLIAMS, SENIOR FUND MANAGER, EQUITIES, RLAM, SAYING: ''I don't think Brent's been that affected. But if the long end starts to move out then that could be, move up rather, then that could be a concern because that could put pressure on corporate margins again, energy costs being part of the P&L for companies. But at the moment it seems to be a fairly relaxed response. '' A little bit too relaxed, perhaps?
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