Markets shrugged off improving economic data from Asia on Monday morning with stocks falling into the red on concerns over a potential Western military intervention in Syria.
Syria will be in firm focus this week ahead of a vote by US Congress over whether or not to proceed with a military attack after last month's alleged use of chemical weapons by Bashar Al-Assad's regime.
Tensions at the G20 Summit escalated last week after Vladimir Putin said Russia would "assist" Syria if it was attacked by the US, just as President Barack Obama was trying to rally for support from global leaders for an intervention.
Talks between US Secretary of State John Kerry and UK Foreign Secretary William Hague caught the headlines this morning after Hague said the objectives and efforts of the US and UK "remain closely aligned". Kerry said that the relationship between the two countries was not affected by the UK's decision not engage in a military attack, but said that "the risk of not acting is greater than the risk of acting".
"Traders are fearful of the implications of the military intervention by the US, particularly after Putin warned that a Western strike could be met with retaliation as he continues to support Syria financially and strategically," said Market Strategist Ishaq Siddiqi from ETX Capital.
Uncertainty regarding Federal Reserve monetary policy also prompted traders to adopt a cautious approach in the aftermath of Friday's disappointing jobs report. A worse-than-expected rise in non-farm payrolls in August sparked speculation that the US central bank could hold off from tapering its quantitative easing (QE) programme until later on in the year. However, the unemployment rate fell last month from 7.4% to 7.3%.
Chinese exports rise, Japan GDP revised up
Asian markets performed well overnight after Chinese trade and inflation numbers brightened the third-quarter outlook for the world's second-largest economy. Chinese exports rose by a stronger-than-expected 7.2% in August and imports jumped by 7%, while the annual rate of consumer price inflation eased from 2.7% to 2.6%.
Writing in Monday's Financial Times Chinese Premier Li Keqiang said that his country will stay the course on sustainable growth, by continuing to promote reforms, with an aim of meeting its 7.5% lower bound for gross domestic product (GDP) growth this year.
Meanwhile, second-quarter GDP estimates in Japan were revised higher from 0.6% to 0.9%, as confidence grows in Prime Minister Shinzo Abe's so-called 'Abenomics'. While this was slightly lower than predictions, this data - along with the news that Tokyo will host the 2020 Olympics - gave the Nikkei 225 index a strong boost.
FTSE 100: BG drops after cutting production guidance
Oil and gas group BG was a heavy faller this morning after lowering its 2014 production milestones due to the instability in Egypt, delays to the start-up of production in Norway and low natural gas prices in the US.
Sugar and food group Tate & Lyle wasn't far behind after UBS downgraded the stock from 'neutral' to 'sell', saying that its current valuation is too high and does not reflect that "sucralose prices continue to decline as 'generic' competitors improve product quality and access greater scale".
Food ingredients peer and retail group Associated British Foods was also lower despite saying a strong finish to the year from Primark will help it deliver adjusted operating profit ahead of expectations for the second half. Instead, the market was focusing on comments about low EU sugar prices next year.
Mining stocks were putting in a mixed performance despite the strong data from top metals user China. Analysts at Citigroup said today that mining stocks could benefit from "additional short-term price momentum in the sector on positive rhetoric" following the category's underperformance so far this year compared with the UK market. "However, valuations are now looking more fully priced and we think the rally will fade into year end." The bank named Rio Tinto and Glencore Xstrata as its favoured stocks in the UK diversified mining sector, both of which were making gains this morning.
GlaxoSmithKline declined after confirming it has reached an agreement to sell its Lucozade and Ribena brands to Japanese firm Suntory Beverage & Food for £1.35bn in cash. The company said that now is the right time to sell "as we increase the focus of our Consumer Healthcare business and execute the delivery of our late stage pipeline of pharmaceuticals and vaccines".
FTSE 100 - Risers
Fresnillo (FRES) 1,304.00p +3.16%
Burberry Group (BRBY) 1,631.00p +1.94%
Whitbread (WTB) 3,219.00p +1.64%
Legal & General Group (LGEN) 193.50p +1.47%
Aviva (AV.) 395.10p +1.05%
Glencore Xstrata (GLEN) 321.70p +1.05%
Kingfisher (KGF) 410.60p +1.03%
ITV (ITV) 176.30p +1.03%
Land Securities Group (LAND) 893.00p +1.02%
ARM Holdings (ARM) 901.50p +1.01%
FTSE 100 - Fallers
BG Group (BG.) 1,225.50p -4.41%
Tate & Lyle (TATE) 780.50p -3.28%
Associated British Foods (ABF) 1,804.00p -2.54%
Rexam (REX) 495.10p -1.57%
Standard Chartered (STAN) 1,451.00p -1.43%
Royal Dutch Shell 'A' (RDSA) 2,051.50p -1.30%
Imperial Tobacco Group (IMT) 2,232.00p -1.28%
United Utilities Group (UU.) 672.00p -1.25%
National Grid (NG.) 733.00p -1.21%
Smith & Nephew (SN.) 761.00p -1.04%
FTSE 250 - Risers
CSR (CSR) 522.00p +5.45%
Computacenter (CCC) 545.50p +4.20%
Debenhams (DEB) 105.00p +3.45%
Barratt Developments (BDEV) 324.80p +3.27%
Centamin (DI) (CEY) 47.50p +3.04%
LondonMetric Property (LMP) 112.60p +2.55%
Bank of Georgia Holdings (BGEO) 1,798.00p +2.45%
Kazakhmys (KAZ) 319.10p +2.34%
ICAP (IAP) 408.70p +2.30%
Ferrexpo (FXPO) 180.90p +2.20%
FTSE 250 - Fallers
Xaar (XAR) 771.00p -2.96%
Imagination Technologies Group (IMG) 285.20p -2.83%
BTG (BTG) 367.00p -2.60%
Petra Diamonds Ltd.(DI) (PDL) 124.00p -2.59%
Salamander Energy (SMDR) 126.20p -2.47%
Berendsen (BRSN) 915.50p -1.93%
Morgan Advance Materials (MGAM) 305.20p -1.86%
St. Modwen Properties (SMP) 298.80p -1.81%
Spectris (SXS) 2,288.00p -1.76%
Kentz Corporation Ltd. (KENZ) 553.00p -1.60%