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Markets Rebound as Syria Jitters Ease

Updated: Thursday, August 29 2013, 01:37 PM EDT

LONDON (AP) - Indications that a U.S.-led military intervention in Syria may not be happening imminently allowed investors to regroup Thursday, helping to shore up stock markets. Commodities, such as oil and gold, drifted lower after racing ahead in the first half of the week as worries over an attack escalated.

However, the prospect of an immediate multinational response appears to have diminished, with President Barack Obama giving the impression Wednesday that he had not yet decided to back a military strike.

The U.K. government also backed down on a parliamentary vote to authorize British participation in any strike against Syria until UN inspectors reveal their findings on the apparent chemical attack in the suburbs of Damascus that has been blamed on the government of President Bashar Assad. The report is expected within a week.

"What seems like a delay in U.S. and allied military action in Syria is providing temporary relief for the equity markets that endured weakness earlier in the week," said Neil MacKinnon, global macro strategist at VTB Capital.

In Europe, the FTSE 100 index of leading British shares closed up 0.8 percent at 6,483 while Germany's DAX was 0.45 percent higher at 8,194. The CAC-40 in France was 0.7 percent higher at 3,986.

In the U.S., the Dow Jones industrial average was up 0.5 percent at 14,895 while the broader S&P 500 index rose 0.6 percent to 1,644.

An upward revision to second-quarter U.S. economic growth to an annualized rate of 2.5 percent from the previous estimate of 1.7 percent had little impact on trading as it was largely due to an improvement in the country's trade balance — there were more exports relative to imports than previously thought.

Up until this week, the main focus of attention through the summer months has been whether the Federal Reserve will start to reduce its monetary stimulus as soon as next months. A run of largely solid economic figures had raised the likelihood of that happening but recently the data have been a little bit more mixed.

The Fed is currently buying $85 billion worth of financial assets a month in an attempt to lower borrowing rates and shore up the U.S. economy.

The money has been one of the reasons why stock markets around the world have recovered over the past few years following the global financial crisis so the prospect of a reduction in the stimulus, or so-called tapering, has been met with concern by a number of investors even though it would indicate economic conditions getting back to normal.

"As investors weigh the near-term risk posed by potential military intervention in Syria and the uncertainty surrounding the timing and magnitude of the Fed's next move, the potential for volatility to re-emerge in the capital markets also appears to be on the rise," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Earlier in Asia, Japan's Nikkei 225 index rose 0.9 percent to close at 13,459.71 while South Korea's Kospi advanced 1.2 percent to 1,907.54. Hong Kong's Hang Seng rose 0.7 percent to 21,704.78 and Australia's S&P/ASX 200 gained 0.1 percent to 5,092.40.

Elsewhere, there was a reverse of the trends that had dominated much of the week, particularly in commodity markets. The price of benchmark oil was down 98 cents at $109.13 a barrel, On Wednesday, the contract closed at $110.10 a barrel, its highest finish since May 3, 2011.

Gold prices were also a tad softer — down 0.9 percent at $1,406 an ounce — after racing up to three-month highs on the back of worries over Syria. Gold often garners support through its status as a safe investment at a time of geopolitical uncertainty.

In the currency markets, the euro was down 0.8 percent at $1.3231 while the dollar rose 0.7 percent to 98.37 yen.

Copyright 2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Markets Rebound as Syria Jitters Ease

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The Syrian civil war, (also known as the Syrian uprising or Syrian crisis) is an ongoing armed conflict in Syria between forces loyal to the Ba'ath government and those seeking to oust it. A part of the larger Middle Eastern protest movement known as the Arab Spring, the conflict began March 15th, 2011 with local demonstrations that grew in scope to become nationwide by April 2011.

Protesters demanded the resignation of President Bashar al-Assad, whose family has held the presidency in Syria since 1971, as well as the end of Ba'ath Party rule, which began in 1963.

The Syrian Army was deployed in April of 2011 to stop the uprising, and soldiers fired on demonstrators across the country. After months of cities and neighborhoods being cut-off by the Army the protests evolved into an armed rebellion.

The Arab League, United States, European Union, and other countries condemned the use of violence against the protesters. The Arab League suspended Syria's membership as a result of the government's response to the crisis, but granted the Syrian National Coalition, a coalition of Syrian political opposition groups, Syria's seat on 6 March 2013.

According to the UN, about 4 million Syrians have been displaced within the country and 2 million have fled to other countries.

Syrian government supporters include Russia and Iran, while Qatar and Saudi Arabia are providing material and weapons to the rebels.

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