September 6, 2013 / 3:16 PM / 5 years ago

European shares knocked by Syria worries in volatile trade

* FTSEurofirst 300 up 0.2 percent, off intraday highs

* Putin reaffirms support for Syria, knocking market back

* Stocks had jumped as U.S. job data seen delaying Fed taper

* European stocks attract strong flows

By Alistair Smout

LONDON, Sept 6 (Reuters) - European shares were slightly higher late on Friday, wiping out most gains spurred by a weaker-than-expected U.S. jobs report, as concerns over Russia’s support for Syria in the event of an attack unnerved investors.

In a volatile session, the FTSEurofirst 300 dropped by as 0.4 percent after Bloomberg reported that Russia would “assist” Syria in the case of an external attack. The index pared losses when Reuters clarified that Russia would “maintain current support” if Syria was attacked.

Earlier in the afternoon, the index had jumped 0.6 percent following weaker-than-forecast jobs data from the United States, which raised the prospect of continued monetary stimulus by the U.S. Federal Reserve.

“It just goes to show how jittery the markets are over Syria ... (Russian President) Putin’s comments are a spanner in the works for the U.S., as it ups the ante and raises uncertainty if they take action,” David Madden, market analyst at IG, said, adding that the situation in the Middle East was capping gains in equity markets.

“We could gain strongly if Syria wasn’t around, but if it all goes pear-shaped, we could be sharply lower again.”

The FTSEurofirst 300 recovered to trade up 0.2 percent at 1,225.36 points by 1436 GMT, well off its intraday high but with investors able to refocus on the jobs data once the volatility around Syria had settled down.

U.S. jobs growth was less than expected in August, indicating the Federal Reserve may not start tapering stimulus - which has helped drive equity markets higher - this month as markets had expected.

“The labour market data is weaker than expected - with weaker job creation - and as worker participation has fallen, it’s no surprise that the tapering that was seen to be in the price is coming out of the price, and now we’re rallying,” Gerard Lane, analyst at Shore Capital, said.

“What’s a concern is that bad news is such good news ... if they don’t taper, then it’s because the economy is worse than we think, which isn’t good in the long run for equities.”

The FTSEurofirst 300 has risen 2.5 percent so far this week, putting it on track for its best weekly showing since mid-July.

Signs of an economic recovery in Europe have prompted several strategists to raise their ratings on European shares, with Citi and UBS both upgrading the region this week.

U.S. investors also added to their holdings of European equities for a 10th straight week in the seven days to Sept. 4 as they switched out of domestic, emerging market and Japanese stocks, Lipper data showed.

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