Britain's FTSE 100 erased all its session gains to close lower on Thursday as an oil price spike back above $55 sent investors scurrying, although the market still managed to end the first quarter of 2005 with a small gain. Caterer Compass was the weakest blue chip performer, down 5 percent after it warned of a 24 million pound hit to its annual profits. The slice out of earnings is due largely to a switch from military contracts in the Middle East to less lucrative peacekeeping work.
There were some bright notes however, including a surge for pharmaceutical group Shire after it made reassuring comments about a key drug.
The FTSE 100 closed down 6.3 points at 4,894.4 - down for a third straight day but still sealing its fourth consecutive quarterly rise. However, gains so far in 2005 would have been greater were it not for a lacklustre March, when the blue chip index fell 1.4 percent. The drop was the FTSE's first negative monthly return since last July.
Analysts said the market looked relatively stable but told investors not to expect great progress in the short-term.
"It's difficult to get the feeling the market is going to do anything but trade sideways for a month or two," said John Smith, investment director at Brown Shipley. "We've got higher interest rates somewhere on the horizon and the downside looks supported by the economic background and corporate profits growth."
Oil prices may weigh on sentiment going forward, with investment bank Goldman Sachs saying the commodity has entered a "super-spike" period and could surge as high as $105 a barrel.
Shire, Britain's third-largest drug maker, topped the blue chip leaderboard, up 7.6 percent after its chief executive said US sales of hyperactivity drug Adderall XR had steadied following the drug's surprise suspension in Canada earlier this year.
"We think the scare is over," Matthew Emmens told the Lehman Brothers Global Healthcare conference in Miami on Wednesday, according to a web cast of his speech.
Miners Xstrata and Antofagasta gained 2.9 percent and 1.8 percent respectively as copper hit a new record peak in Shanghai. Europe's largest copper producer also forecast strong demand.
In the energy sector, oil giant BP added 0.3 percent ahead of its trading statement on Monday.
"We're comfortable buying BP. We think the scope for upgrades to earnings is still there because of a higher oil price," said Brown Shipley's Smith.
Renewed take-over rumours pushed mobile phone firm O2 up 1.5 percent as talk swirled that European rivals Deutsche Telekom and Telefonica might bid for the UK group. All three companies declined to comment.
On the downside, medical device firm Smith & Nephew was one of the weakest FTSE 100 stocks, off 4.7 percent after saying it had received a subpoena from the US Attorney's office in Newark, New Jersey seeking information about agreements with orthopaedic surgeons over reconstructive products. US device makers said they had also received subpoenas from federal prosecutors.
On the FTSE 250 index, milk producer Dairy Crest jumped 5.2 percent after it promised to meet pretax profit expectations for the year, despite tough competition. But engineer FKI flopped 5.8 percent after it warned a weak US dollar would hit profits.