Market report: Friday close

SOARING oil prices and fresh falls on Wall Street this afternoon meant share prices had only one way to go in London - down.

The FTSE 100 index came off its three-year high and slumped back below 5100, nursing a fall of 35.4 points to 5079.0. Some City folk have begun asking why share prices are so high when the oil price continues to rise, touching $60 a barrel in New York.

Others argue that investors should go with the flow and that the market is underpinned by takeover action and the possibility of interest rate cuts before the year-end. The blue-chip index has also been supported by the likes of BP, off 2½p at 585p, and Shell, up 3¼p at 521p, which benefit from higher oil prices.

But France's Prime Minister, Dominique de Villepin, today repeated his promise to move quickly to spur growth and cut unemployment. 'An oil price of $60 per barrel is a heavy constraint that weighs on us, on our economy,' he added.

The high oil price certainly weighs heavily with the likes of British Airways. It has already levied a fuel surcharge on passengers, and says it may now be forced to increase this. The shares fell 3¼p to 275¾p. Stephen Furlong at Davy Stockbrokers says that surcharges are probably still offsetting only about half the rise in fuel costs. Meanwhile, discount carriers Ryanair, down 10 cents at €6.46, and easyJet, off 5¾p at 239p, are expected to benefit from the move by charter carriers away from low-cost markets with network carriers seeking longer routes.

Gas services supplier Centrica rose 8½p to 232½p on the back of its latest trading update. The company has agreed to shell out a further £500m buying back its own shares. That stretches the amount paid to shareholders to £2bn. Dresdner Kleinwort Wasserstein remains a seller.

Stagecoach was ¼p cheaper at 120p on further reflection of Wednesday's trading news. Broker ABN Amro says the rail side of the business is overvalued, and is a seller, but Goldman Sachs has upgraded from underperform to in-line.