Meanwhile, news that the Israeli military has sent ground troops into Gaza to fight with Palestinian militants also dampened sentiment this morning.

The FTSE 100 was down 0.4% at 6,714 in early trading as indices across Europe tracked declines on Wall Street and Asia overnight.

“While the market response to the unfortunate air incident was not as bad as many might have expected, with this being week-end and geopolitical risk such an unknown quantity, be prepared for some risk aversion on this, sadly, less-than-happy Friday,” said Mike van Dulken, Head of Research at Accendo Markets.

The crash of a Malaysia Airlines jet in Ukraine, apparently shot down by separatist rebels, rocked financial markets and sparked fears of renewed tensions between Russia and the West. Flight MH-17 from Amsterdam to Kuala Lumpur went down in eastern Ukraine on Thursday night, killing all 298 people aboard.

Accusations of blame have flown back and forward, with Ukraine accusing pro-Moscow militants of firing a long-range, Soviet-era SA-11 ground-to-air missile. Rebel leaders denied any involvement and claimed a Ukrainian air force jet had brought down the Boeing 777.

In other news, the President of the St Louis Fed James Bullard said that the central bank may have to move sooner than expected to raise interest rates on the back of an improvement in economic data. “If macroeconomic conditions continue to improve at the current pace, the normalisation process may need to begin sooner rather than later,” he said yesterday.

Airlines rise despite Malaysian Airlines crash

Airlines IAG and easyJet were both making gains today despite the fallout from the Malaysia Airlines crash. A spokeswoman for IAG-owned British Airways said BA aircraft were not using Ukrainian airspace with the exception of the airline’s daily flight between London and Kiev, which is not near the crash site. She said the airline was keeping services under review.

Defensive stocks were performing well this morning as investors fled for safety with utility peers Severn Trent, and United Utilities among the few risers on the blue-chip index.

Housebuilder Barratt Developments was leading the fallers on the FTSE 100 after Liberum downgraded the stock to ‘hold’ and slashed its target price from 468p to 387p.

ITV continued to extend gains after a big jump yesterday as investors continued to react to bid speculation following the purchase of a 6.4% stake in the broadcaster by Liberty Global.

FTSE 100 – Risers
International Consolidated Airlines Group SA (CDI) (IAG) 334.80p +1.24%
Severn Trent (SVT) 1,903.00p +0.90%
Randgold Resources Ltd. (RRS) 5,125.00p +0.79%
ITV (ITV) 196.50p +0.72%
Weir Group (WEIR) 2,761.00p +0.62%
United Utilities Group (UU.) 887.00p +0.57%
BG Group (BG.) 1,194.00p +0.55%
Fresnillo (FRES) 906.50p +0.55%
Shire Plc (SHP) 4,829.00p +0.48%
easyJet (EZJ) 1,347.00p +0.45%

FTSE 100 – Fallers
Barratt Developments (BDEV) 352.10p -3.16%
Sports Direct International (SPD) 684.00p -1.94%
GKN (GKN) 348.10p -1.75%
Meggitt (MGGT) 538.00p -1.56%
Persimmon (PSN) 1,248.00p -1.42%
Rio Tinto (RIO) 3,268.50p -1.40%
Kingfisher (KGF) 335.10p -1.38%
Wolseley (WOS) 3,135.00p -1.38%
TUI Travel (TT.) 367.20p -1.37%
Old Mutual (OML) 198.40p -1.29%

Source: ShareCast