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SYDNEY, Aug 29 (Reuters) - Australian shares fell 0.4 percent on Thursday morning, as investors remained cautious ahead of a looming election next week and on underlying concerns of an upheaval in the Middle East amid preparations by the West for a military strike on Syria.
The tentative mood in the market eclipsed positive earnings news from flagship carrier Qantas Airways Ltd.
“I still think there is a bit of nervousness in the market around Syria, and the Middle East, and domestically the election,” said Martin Lakos.
Australian will go to the polls on Sept. 7.
The S&P/ASX 200 index fell 21.9 points to 5,065.3 by 0202 GMT. The benchmark fell 1.1 percent on Wednesday, its biggest one-day drop in three weeks, as concerns over a probable U.S.-led military strike against Syria prompted investors to exit from riskier assets.
Financials weighed on the market, with Australia and New Zealand Banking Group losing 1.1 percent and National Australia Bank off 0.9 percent.
A handful of defensives were also slightly weaker with flagship telecommunications giant Telstra Corporation Ltd down 0.8 percent and biotechnology firm CSL Ltd shedding 1 percent.
Qantas Airways stole the early spotlight, with its stock soaring 9.1 percent to a six-week high of A$1.34 as it doubled its underlying annual profit, as shrinking losses on its international arm offset tougher competition on its lucrative domestic routes.
Department store giant David Jones Ltd climbed 2.8 percent to a 3-1/2 month high of A$2.90 after reporting total sales revenue of $449.8 million for the fourth quarter, and adding that the company would continue to focus on lifting margins and cutting costs.
Oil-linked stocks also rose, helping to limit the broader market losses, as brent crude hit a six-month high after threat of Western intervention in the Syrian conflict stirred concerns over Middle East oil supplies.
Woodside Petroleum Ltd added 0.7 percent and Santos Ltd rose 0.3 percent.
On the whole, Macquarie Bank’s Lakos said investors will remain on the defensive ahead of the U.S. Federal Reserve’s meeting on September 17, with markets still debating when and how fast the Fed will start to reduce its stimulus.
“We’ll get a greater indication as to the potential of tapering out of that, so I think that’s getting market players on the sideline a bit.”
A mixed earnings season and concerns about a turn in Fed policy have confined the Australian benchmark around the 5,100 level for most of August.
New Zealand’s benchmark NZX 50 index <.NZ50 edged 0.1 percent higher to 4,512.8.
Reporting by Thuy Ong; Editing by Shri Navaratnam