By Francesco Canepa
LONDON (Reuters) - Britain's top equity index fell to a near four-month low on Friday as the prospect of U.S. air strikes in Iraq added to an already gloomy geopolitical and economic landscape.
U.S. President Barack Obama authorized air strikes against Islamist militants in northern Iraq to prevent a "potential act of genocide".
The development added to worries about conflicts elsewhere in the Middle East and in Ukraine, which, together with weak European economic data and the prospect of monetary tightening in the United States, have knocked back global stock markets over the last month.
The blue-chip FTSE 100 index (FTSE:) was down by 0.7 percent, or 44.91 points, at 6,552.46 points - having set its lowest point since mid-April at 6,528.73 points earlier in the day. The FTSE 100 is down by nearly 3 percent since the start of 2014.
"At every corner, it seems that something else comes out of the woodwork that gives people another reason to sell," said Hantec Markets analyst Richard Perry.
Perry said the FTSE could find buyers coming in if it fell down to the 6,500 point level, which marked earlier lows this year around March and April, after which the index recovered.
Central Markets trading analyst Joe Neighbour said the FTSE could fall to 6,425 points if it failed to hold above 6,500 points.
Neighbour said while the uncertainty over possible U.S. military action in Iraq persisted, he would advise investors to look to sell the FTSE on any rallies for a profit, rather than use days when the FTSE fell to buy up shares.
"I would still look to sell into strength," he said.
Financial groups Schroders (L:SDR) and Old Mutual (L:OML), down 4 percent and 2 percent respectively, were among the biggest fallers as investors worried the current market volatility would affect their performance and result in withdrawals of money by clients.
U.S. funds invested in European equities suffered their longest outflows streak in three years in the seven days to Aug. 6 as they bled money for the eighth consecutive week, Lipper data showed.
"The market is going down and these are heavily geared plays on the market," Jason Streets, an analyst at Jefferies & Company, said.
"Not only are they linked to the market in terms of management fees but flows tend to follow the market too."
(Additional reporting by Sudip Kar-Gupta; Editing by Toby Chopra)