Britain's FTSE-100 closed lower on Monday as investors remained nervous about high oil prices and continuing violence in the Middle East, although the index crept off session lows and closed above the 4,400 mark.
Software maker Sage ended as the biggest blue-chip failure, down 3.5 percent. Traders said the very volatile stock was also a proxy for New York's Nasdaq index, which was down one percent by the close of London trade.
The FTSE-100 benchmark index ended the session down 38.8 points, or 0.9 percent, at 4,403 - still in negative territory but above a seven-week intraday low of 4,363 points. Global bank HSBC, down two percent, was the blue-chip stock, which put the most pressure on the index.
Analysts said the market did not seem to be heading for a sharp sell-off but neither did it look set for a sharp rebound. The FTSE has dropped nearly four percent since touching a 21-month closing high in April.
"My view is it's going to take a fair while to sort out. I like to look on a six-month time-scale and on that, in round terms, we've retreated from an overbought position but we've not reached an oversold one. It's going to be a sticky summer," said Dan Bunting, a strategist at Dryden Wealth Management.
Soaring oil prices were the main talking point as US light crude hit an all-time peak of $41.75 on worries that a sabotage attack on Middle East oil infrastructure could disrupt supplies. The price later retreated to hover around $41 a barrel.
Concerns about the lofty oil price dragged shares in Europe's second-biggest airline British Airways down 1.4 percent by the close. The carrier reported a rise in annual earnings but said its fuel costs would rise by about 150 million pounds in the year to March 2005.
Other travel-related stocks were also knocked as traders said industry demand for travel could suffer from the suicide car bomb which killed the head of Iraq's Governing Council and four small bomb blasts in Turkey on Sunday.
Hotels group Hilton lost three percent and online travel retailer Lastminute.com, which sells everything from package holidays to theatre tickets, slumped 8.6 percent.
In the leisure sector, Enterprise Inns and rival Punch Taverns lost over two percent. Shares in the pubs groups have struggled since the government started a probe into the relationship between pub firms and their tenants.
Brokerage Investec repeated its "sell" rating on both stocks and said the companies' reputations could suffer as a result of the inquiry.
Supermarket chain Tesco was one of a handful of blue-chip stocks to gain ground, up 0.8 percent as Credit Suisse First Boston said investors might benefit from rotating funds into grocers.
"Interest rates are already rising, a condition that normally encourages a switch from more cyclical general retailers into the more defensive food retailers," said analysts at the investment bank.
Gas and power network operator National Grid Transco also bucked the trend with a 0.5 percent rise after Merrill Lynch repeated its "buy" rating on the stock.
Among mid-caps, water and sewerage company Pennon finished as the best performer with a 4.6 percent rise after it rejected a bid approach from investment group Terra Firma.
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