GLOBAL MARKETS-U.S. stocks, oil, gold fall on Syria uncertainty
* Dollar remains near 4-week high
* U.S. shares fall as Syria attack likelihood fades
* Oil and gold fall
NEW YORK, Aug 30 (Reuters) - Stocks and oil fell on Friday as lacklustre U.S. economic data moderated expectations of a reduction soon of the U.S. Federal Reserve's stimulus program, and as the chances weakened of an imminent Western military strike against Syria. The U.S. dollar rose to a four-week high against a basket of major currencies on Friday, helped by persistent uncertainty about Syria and a weak euro which fell after data showed benign inflation and elevated unemployment in the euro zone. U.S. consumer spending barely rose, up 0.1 percent, and inflation was tame in July, with a price index for consumer spending edging up 0.1 percent. . "You are getting a lot of push-pull from the Syria thing - will they, won't they - and then the data," said John Canally, investment strategist and economist for LPL Financial in Boston. "This one fits in the category of another soft report and it is going to give the Fed a problem because the economy is going to be weak and yet they are going to taper anyway." U.S. stocks slipped, with the S&P500 index likely to end August with its worst monthly showing in over a year, as the likelihood faded of an imminent U.S.-led strike against Syria. The Dow Jones industrial average was down 45.85 points, or 0.31 percent, at 14,795.10. The Standard & Poor's 500 Index was down 5.48 points, or 0.33 percent, at 1,632.69. The Nasdaq Composite Index was down 24.92 points, or 0.69 percent, at 3,595.39. An extended holiday weekend in America with Labor Day on Monday, and month-end positioning by traders, kept activity light. Market participants remained worried about the Middle East and the potential impact of an early withdrawal of stimulus "I think the dollar recovery trend remains in place, though we may see a pause over the next few days," said Ian Stannard, head of European foreign exchange strategy at Morgan Stanley. "The underlying fundamental picture is still there and that comes down to a rise in global yields and a rise in the U.S. dollar that is still going to weigh on the more vulnerable currencies." Most major equity markets and many emerging currencies looked set to end the week and the month sharply lower as investors pull out of riskier assets in expectation of the Fed action and some form of Western intervention against Syria. The growing caution was reflected in a Reuters asset allocation poll of 54 fund managers across the United States, Europe and Japan. It showed investors had increased cash holdings to their highest level in a year, while also lifting exposure to equities and cutting bond positions.
SYRIA Fears of a broader conflict in the Middle East have eased slightly after Britain said it would not join any military action, although France said it still supported a move to punish Syrian President Bashar al-Assad's government for an apparent poison gas attack on civilians. Any military strike now looks likely to be delayed at least until U.N. investigators report back after leaving Syria on Saturday, with Russia still fiercely opposing any move and China cautioning against any U.N. Security Council action until the investigation is complete. The easing of tensions over Syria sent Brent crude oil to near $115 a barrel, off highs of $117 set earlier this week when military action seemed imminent. U.S. crude was down 74 cents to $108.04. "The situation is still volatile," said Alex Yap, an analyst at energy consultancy FGE in Singapore. "If the U.S. decides to attack, prices could be pushed higher."
GRIM MONTH MSCI's world equity index, which tracks shares in 45 countries, fell 0.3 percent on Friday, heading for its worst week since June 21. European shares felt the pressure from a drop in oil stocks with the broader STOXX Europe 600 index down 0.7 percent, taking its weekly losses to around 2.2 percent. Earlier, Japan's Nikkei lost 0.5 percent despite new data that painted a brighter economic picture. Currency markets focused on the economic outlook and interest rate differentials. The two-year U.S. Treasury yield recently climbed to its highest since early July and the 10-year yield climbed back up to 2.76 percent and lent support to the dollar. The dollar index, which measures its value against six major currencies, was at 82.110, not far from a four-week high of 82.141 touched earlier in the day. Among emerging currencies, the Indian rupee has tumbled 10.4 percent against the dollar so far this month, and looks to be heading for its largest monthly fall ever, according to Thomson Reuters data. A senior finance ministry official told Reuters that India is attempting to coordinate intervention in offshore currency markets with other emerging-economy countries.. A Brazilian finance ministry official, speaking on condition of anonymity, said the Brazilian government is not aware of any concrete or immediate plan to coordinate offshore intervention. In commodity markets, gold fell 0.9 percent to below $1,400 an ounce, moving away from a 3-1/2 month high hit Wednesday when fears over Syria prompted a flight to safety.