Travel firms drag European shares lower on Syria threat
* FTSEurofirst 300 down 0.4 percent at 1,197.78
* Western forces gear-up for attack on Syria
* Middle-east troubles hit travel firms
* Energy shares benefit from rising cost of oil
LONDON, Aug 28 (Reuters) - The threat 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.
Approaching the close, the FTSEurofirst 300 was down 4.58 points or 0.4 percent at 1,197.78, by 1420 GMT, with the index testing technical support around 1,192, having broken below the 50-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 region.
Kevin Gardiner, head of investment strategy in Europe at Barclays Wealth, said longer-term the impact on market from the crisis in Syria should soften, but in the short-term the geopolitical backdrop would be difficult to trade as there are too many unkowns.
"Short-term volatility would be the best way to play it," he said.
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 23 points.
The conflict in Syria has contributed to investors cashing in an 8 percent rally in European stocks since late June and purchasing safe-haven assets such as government bonds and gold, while the oil price has spiked on supply concerns.
Societe Generale said the North Sea crude oil benchmark could surge as high as $150 per barrel if the war affects key oil producers such as Iraq.
Travel & leisure stocks fell 1.6 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 1.4 percent.
Cautious guidance from Europe's largest hotel operator, Accor, which fell 4.2 percent, also weighed on the sector.
The jump in crude prices, however, boosted heavyweight oil & gas stocks, which rose 2.3 percent, and helped marginalise wider index losses.
International gas and oil producer BG Group jumped 4.6 percent, while Norway's Statoil rose 4.3 percent, also thanks to 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 10.2 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, this week, the situation in 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.