April 11, 2018 / 8:59 AM / a year ago

Tesco outperforms as tension over Syria drags Britain's FTSE down

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* FTSE 100 down 0.1 pct

* Tesco up 5.4 pct after results

* Eurocontrol warns airlines on possible Syria airstrikes

* EasyJet, Ryanair, Carnival and Intercontinental Hotel fall

By Helen Reid

LONDON, April 11 (Reuters) - Renewed caution among investors dented Britain’s top share index on Wednesday as Western forces discussed possible military action against Syria, although strong results from Tesco pushed its shares higher.

The FTSE 100 was down 0.1 percent, though it remained near the six-week high it reached on Tuesday after several days of gains.

“Western military action against Syria seems imminent - and that is obviously going to lead to lots of worse things than yield curves being flattened/levelled entirely if it happens,” Rabobank analysts said in a note.

Energy stocks tumbled as crude prices dipped, though escalating tension in the Middle East kept Brent above $70 a barrel.

The silver lining was Britain’s biggest retailer Tesco , which topped the FTSE 100, jumping 5.6 percent to a two-year high after it beat its profit forecast.

“There’s less of a threat from Lidl and Aldi and people are gravitating back to things like Tesco,” said Paul Mumford, fund manager at Cavendish Asset Management, referring to German discount retailers.

“You’ve had a number of people shorting Tesco in the past, and you might well get new investors in and some of the shorters closing their positions,” he added.

The escalation of tensions over a chemical attack in Syria weighed on travel stocks after air traffic control agency Eurocontrol warned airlines to exercise caution in the eastern Mediterranean due to possible air strikes into Syria in the next 72 hours.

Budget airlines easyJet and Ryanair declined 0.3 and 0.8 percent, while cruise operator Carnival dropped 1.7 percent and Intercontinental Hotel fell 0.7 percent.

High dividend-paying consumer staples stocks such as Unilever, Diageo and Reckitt Benckiser, which investors usually reach for in times of market stress, all fell.

Traders said a strengthening pound was clouding the case for buying these big exporters which benefit from a weaker sterling/dollar exchange rate.

Among smaller companies, shares in online fashion retailer Asos dropped 8 percent, hitting a more than three-month low, after results disappointed investors.

The retailer lifted its capital expenditure guidance, saying it would invest more in logistics and distribution, and reported sales and profit slightly below analysts’ forecasts.

“The problem you always have with stocks like this is when they’re on such a high rating, any disappointment means the shares get knocked back quite a bit,” said Mumford at Cavendish Asset Management. (Reporting by Helen Reid; Editing by Susan Fenton)

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