Market report: Monday close

US securities house Goldman Sachs, which last week warned the oil price could spike up to $105 a barrel in the short term, has upgraded the European oil and gas sector from underweight to neutral.

Goldman has made the move, which coincides with another rise in the price on the futures market to $58.1 a barrel, to reflect sharp upgrades in oil-price forecasts. It has increased the average realised price for the sector by $6 a barrel to $36 this year but says returns are likely to lag the macro-environment, although we should still see sector upside.

Curiously, it has downgraded Shell, up 3½p at 479p, from in-line to underperform and is telling clients to sell into strength for now, until fundamentals reassert themselves in the second half of this year. BP, up 7½p at 559½p on that dearer oil price, remains its top pick, with an overweight rating. But the company's firstquarter trading update fell short of expectations.

Share prices generally drifted lower with the FTSE 100 index closing down 17.3 points at 4,896.7. On Wall Street, US stocks bounced off their lows but remained modestly lower at lunchtime as crude pulled back from new record highs and a rebound in American International Group aided blue chips.

Logistics outfit Exel jumped 15½p to 863p on renewed takeover talk. Reports from Germany say Exel's most likely suitor, Deutsche Post, wants funds to make acquisitions.

The price war among the big supermarket chains is intensifying. Tesco and Asda, which together account for 46% of the market, plan £167m of cuts. Market leader Tesco, 2¼p cheaper at 315p, will spend £67m on price cuts to 300 items, while Asda will reduce many prices.

Asda, keen to narrow the gap with Tesco, is relying on the massive firepower of its US parent Wal-Mart to help it shrink prices across its range. The cuts will add pressure on Wm Morrison, down 3½p at 194p after a line of fivem went through at 196p. Sainsbury's was 3p easier at 290¼p.

There is a difference of opinion about prospects for Antofagasta, down 27p at 1243p. US investment bank JP Morgan has repeated its underweight recommendation and cut its target from 1042p to 991p. The earnings figure for 2005 has been cut by 13%. Broker Canaccord has repeated its buy rating and lifted its target from 1200p to 1500p.

Gas supplier Centrica rose 4½p to 232½p after broker ABN Amro moved from hold to buy with a 270p target, saying the shares look cheap. The knock-on effects of the rise in wholesale gas prices since the start of the year are now priced in.

InterContinental Hotels, 2½p up at 627½pp, has confirmed plans to sell 10 hotels in Australia, New Zealand and Fiji for what analysts expect to be £135m to £145m. The company is likely to continue running them. IHG has already raised £1.75bn from the sale of 121 hotel properties and has a further £360m of hotels still on the market, not including those put on sale today.

Housebuilder Taylor Woodrow was ½p up at 310p. Broker UBS has raised its recommendation from neutral to buy and its 12-month price target by 10p to 340p.

A clutch of companies joined Aim. Telecom wireless group Telit Communications was placed at 140p by broker Seymour Pierce but slipped to 127½p.

Seymour Pierce was also behind the debut of surface engineering technology specialist Hardide following a placing at 10p. The shares later touched 12½p. It was also debut day for Talarius, which opened at 87½p before gaining ground to 97½p.