Market report: Thursday close

TOP stocks fell in London as investors fretted that the fragile economic recovery, particularly in America, could be hurt by higher oil prices.

The surprise decision on Wednesday by oil cartel Opec to cut production triggered a sell-off overnight in New York that washed over to the City. The FTSE 100 extended its losses after Wall Street opened to more selling. The benchmark index fell 34.2 to 4202.2.

Energy shares rallied on hopes of increased earnings, with Shell up 2 1/4p to 388 1/4p, BG 1 3/4p to 262 1/2p and BP 3 1/2p at 426 1/4p. They were helped by reports that Russia's biggest oil company, Yukos, wants to link with a Western counterpart.

Airlines' shares were grounded by fears of an increase in fuel prices, typically some 15%-20% of their operating costs. British Airways fell 7p to 172 1/4p, Ryanair 7 1/2p to 412p and easyJet 9p to 229p.

The hotels sector also suffered, led by InterContinental, down 4 3/4p to 498 1/4p. Hilton Group fell 2 1/2p to 182 3/4p and cruise operator Carnival lost 22p to 2013p.

The retail sector was apprehensive ahead of the Government revealing which rival supermarkets group will be allowed to bid for Safeway, down 5 1/2p at 296 1/2p.

J Sainsbury lost 9 1/2p to 277 3/4p, as its share of the intensely competitive food market declined. Tesco, down 6 1/4p at 235p, is expected to be barred along with Wal-Mart-owned Asda, leaving Wm Morrison, down 6 1/2p at 220p, free to mount a bid. However, billionaire retail entrepreneur Philip Green could be in the running.

Concern that global media giant Reuters is losing further market share in the intensely competitive financial news and information market to arch-rival Bloomberg left it 13 1/2p weaker at 224 1/2p.

Steady buying of Manchester United shares scored a run-up in the shares to 195 1/2p, a gain of 6 1/2p, a two-year high. Bid hopes have been pushing up the Reds' shares.