European Markets Down as Syria War and US Debt Fears Mount

European markets opened lower on Tuesday as fears of potential US military intervention in Syria and news that the US could hit its debt limit in October swayed investors.

The Stoxx Europe 600 index opened 0.3% lower to 303.60.

Britain's FTSE 100 opened 0.3% lower.

France'c CAC 40 opened 0.5% lower.

Germany's DAX 30 opened 0.7% lower

Spain's IBEX 35 was trading 0.29% lower in early trade.

Italy's FTSE MIB was trading 0.14% higher in early trade.

US Secretary of State John Kerry said on Monday that Syria should be held accountable for the use chemical weapons, suggesting the US could be preparing punitive air strikes against Syrian President Bashar al-Assad's regime.

"Until markets gain some certainty on the attacks we will likely see short-term volatility in equity and commodity markets," said Tim Radford, global analyst at Rivkin Securities.

"At this stage, while governments continue to gather information on the matter, comments from politicians on the attacks should be taken with a grain of salt. It still remains unlikely, given the highly sensitive nature of the political environment in the Middle East, military action will be taken by the US government, particularly if there is no hard evidence the Syrian government was behind the attacks," Radford said.

In the US, media reports on Monday said that the Treasury Department would hit its borrowing ceiling by mid-October and would probably not be able to pay its bills from late October onwards.

Market participants will be tracking the results of the Ifo Germany business confidence survey, due out at 9 am BST.

In the UK, a private survey showed that activity in Britain's service sector grew at its fastest pace since 2007 in the current quarter, with optimism rising to a 15-year high. The Confederation of British Industry (CBI), said in its quarterly service sector survey that volumes in both business and consumer services experienced growth during the quarter. The survey of 161 companies was conducted between 26 July and 14 August.

In Asia and the US

In Asia, the Japanese Nikkei finished 0.69% lower on Tuesday. South Korea's Kospi ended 0.11% lower while Australia's S&P/ASX finished 0.11% higher.

Earlier in Asia, markets witnessed choppy trade as concerns surrounding potential US military intervention in Syria weighed on investors' minds.

"If war does eventuate, higher fuel prices are going to add a third impact point to emerging markets as their currencies were smashed again overnight," said IG Markets strategist Evan Lucas, referring to the fall in the Indian rupee, the Brazilian real and the South African rand.

In China, government data showed that the cumulative profits at major industrial firms rose 11.1% year-on-year during the January-to-July period.

China looks set to hit its full-year growth target of 7.5%. The government's statistics office tried to calm investors and the public who think the Chinese economy is slowing down too rapidly by revealing on Monday that it would expand by 7.5% this year.

In company news, Japanese utility firm Tokyo Electric Power Company rallied 14%. The Japanese could pledge funds for the clean-up efforts at the polluted Fukushima Daiichi nuclear power plant. Japan has a 350bn yen (£2.64bn, €2.27bn , $3.54bn) reserve fund that covers natural disasters and other emergencies.

On Wall Street, indices ended lower on Monday following US Secretary of State John Kerry's comment.

The Dow finished 64.05 points lower at 14,946.46, pulled down by Proctor & Gamble and Microsoft.

The S&P 500 closed 6.72 points lower at 1,656.78 while the Nasdaq ended 0.22 points lower at 3,657.57.