The FTSE 100 dropped firmly into the red on Wednesday morning as escalating tensions between Syria and the West spurred a reduction in risk appetite amongst investors.
UN weapons inspectors are expected to return to a site in Damascus near where the suspected chemical weapons attack happened last week, leading to the deaths of well over a thousand Syrians.
US Vice President Joe Biden said on Tuesday there is "no doubt" that the Syrian government used chemical weapons and it must be held accountable. White House spokesman Jay Carney meanwhile said: "There must be a response [...] What form that response will take is what the President is assessing now."
Syria's government has so far denied the use of chemical weapons and said the US military will fail if it launches an attack against the country. Syrian Foreign Minister Walid al-Muallem has been reported as saying that the government wouldn't step down and its defences would "surprise" those wanting to step in.
"Things have escalated quickly over the last couple of days, with numerous officials from the US, UK and France, in particular, condemning the Syrian government for its alleged use of chemical weapons and calling for action to be taken," said Market Analyst Craig Erlam from Alpari.
"This has prompted a knee-jerk reaction in the markets on expectations that this action will come in the form of a military strikes against the Syrian government."
Oil producers track crude higher
Oil stocks were making gains this morning as crude prices continued to climb on concerns that rising tensions in Syria will disrupt supplies from the Middle East. West Texas crude was at a two-year high early on. Tullow Oil, Shell and BP were among the best performers early on.
Reduced risk appetite meanwhile was benefitting the defensive sectors such as utilities, with United Utilities, National Grid, Severn Trent and Centrica on the up.
Heading the other way were the miners as investors fled for 'safer' assets. Randgold, Rio Tinto and BHP Billiton were in the red on the FTSE 100.
Meggitt, the aerospace, defence and energy group, fell after unveiling plans to acquire Piezotech, a US ceramic devices producer, for $41.2m.
Also lower was Chemring, the manufacturing company serving the defence markets, which saw a sharp year-on-year decline in revenue in the third quarter as it continues to feel the effects of automatic spending cuts in the States.
Online gaming company 888 Holdings rose strongly after achieving record revenue in the first half, driven by the strong performance of casino and poker products.
Investors gave a cool reaction to the announcement by security solutions group G4S that it would sell assets, restructure other businesses and issue new shares
in an attempt to buoy its balance sheet. The company said that underlying profits were flat in the first half.
A number of FTSE 350 stocks will go ex-dividend today, meaning that new investors won't have access to the companies' latest payouts. These firms include: African Barrick Gold, AZ Electronic Materials, CRH, Glencore Xstrata, Henderson Group, Legal & General, Stagecoach, St James's Place, Tullow Oil, Ultra Electronics, Vesuvius, Wood Group.
FTSE 100 - Risers
Tullow Oil (TLW) 1,034.00p +1.57%
G4S (GFS) 248.80p +1.43%
Royal Dutch Shell 'B' (RDSB) 2,189.50p +0.57%
Royal Dutch Shell 'A' (RDSA) 2,104.50p +0.57%
United Utilities Group (UU.) 684.00p +0.44%
BP (BP.) 448.85p +0.39%
Bunzl (BNZL) 1,379.00p +0.22%
National Grid (NG.) 741.50p +0.20%
Severn Trent (SVT) 1,711.00p +0.18%
Centrica (CNA) 388.50p +0.13%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 5,170.00p -3.09%
ARM Holdings (ARM) 854.00p -2.06%
Legal & General Group (LGEN) 190.50p -1.85%
Glencore Xstrata (GLEN) 309.20p -1.59%
Rio Tinto (RIO) 2,947.00p -1.52%
Wood Group (John) (WG.) 802.00p -1.35%
BHP Billiton (BLT) 1,857.50p -1.35%
International Consolidated Airlines Group SA (CDI) (IAG) 296.60p -1.30%
Lloyds Banking Group (LLOY) 71.70p -1.28%
easyJet (EZJ) 1,219.00p -1.22%
FTSE 250 - Risers
Bumi (BUMI) 221.20p +2.84%
Playtech (PTEC) 680.00p +2.18%
888 Holdings (888) 148.00p +2.07%
African Barrick Gold (ABG) 173.30p +1.76%
Lancashire Holdings Limited (LRE) 741.00p +1.44%
Premier Oil (PMO) 358.30p +0.84%
Pennon Group (PNN) 686.50p +0.81%
Berendsen (BRSN) 884.50p +0.74%
PayPoint (PAY) 1,100.00p +0.73%
Ocado Group (OCDO) 300.60p +0.64%
FTSE 250 - Fallers
Kenmare Resources (KMR) 27.75p -6.09%
JPMorgan Indian Inv Trust (JII) 270.00p -5.16%
Evraz (EVR) 119.20p -3.40%
Berkeley Group Holdings (The) (BKG) 2,153.00p -3.19%
Thomas Cook Group (TCG) 132.00p -3.01%
Polymetal International (POLY) 719.50p -2.90%
Henderson Group (HGG) 169.90p -2.47%
Bwin.party Digital Entertainment (BPTY) 125.70p -2.41%
NB Global Floating Rate Income Fund Ltd GBP
(NBLS) 104.60p -2.24%
Genus (GNS) 1,461.00p -1.95%