Market report: Thursday close

ANOTHER robust batch of earnings marked one of the busiest results-reporting days of the year. But while bumper profits have proved a red rag to a bull in recent weeks, jittery investors resisted the temptation to chase the Footsie back above 5000.

Dealers said the market had been shaken by this week's sell-off. They will want to see Wall Street show signs of a sustainable recovery before embarking on another buying spree.

But there is no immediate encouragement from New York. On Wall Street, indices were depressed by rising crude oil prices, which were approaching the $52 a barrel mark, and mixed economic data. The Dow Jones was down 19.3 points to 10,654.7.

'Investors' eyes are on the dollar and oil,' said one dealer. 'The index could retrench another 100 points before buying starts again.' The nerves saw the FTSE 100 index take a late dive to close 16.4 points lower at 4972.1.

There is also a sense that UK shares, under the cloud of a possible interest rate rise, are adjusting to a more realistic level after an over-exuberant rally. 'The Footsie has raced up too fast, too soon and this is a natural pause for breath,' said another dealer.

Several stocks fell despite beating consensus forecasts. Dealers said that was because shares had rallied in recent weeks in anticipation of healthy figures, so strong profits were largely priced into valuations.

Gas supplier Centrica was off 3¾p at 237¼p and drugs distributor Alliance UniChem was down 56p at 720p, with the sell-off exacerbated by gloomy mutterings about the company's outlook. Meanwhile, Royal Bank of Scotland, rumoured to have sold its 135m shares in Spain's Banco Santander, dropped 24p to 1787p.

Life insurer Legal & General lost ½p to 117½p despite beating forecasts, making optimistic outlook statements and receiving an endorsement from Panmure Gordon, which reiterated its buy rating and 140p target.

Another recent outperformer, Cadbury Schweppes, slipped 2¾p to 509p despite ING raising its target to 560p from 520p and advising clients to buy in the wake of yesterday's results. JP Morgan also upgraded Cadbury to neutral as confidence about earnings growth builds.

But there are concerns about the longer-term outlook. Today's treasures - big profits, share buybacks and handsome dividends - mask an underlying malaise among UK firms that could stem the flow of riches in years to come, warns Justin Urquhart Stewart, director at Seven Investment Management.

Share buybacks may boost valuations but the underlying reason for channelling floods of cash back to shareholders is worrying, he says.

'Cash is being made, but companies don't have the confidence to invest in the future. Investors' eyes are being blinded by the gold in front of them,' he adds.

He says M&A activity is being driven as a device for removing capacity, another defensive tactic.

Leading the FTSE 100 was steelmaker Corus, up 1¾p to 58p amid positive comment from CSFB and as it announced an e800m (£555m) refinancing deal.

Smith Barney cut Royal & SunAlliance, 1p weaker at 83½p, to sell from hold, retaining its 80p fair-value rating. Oilfield services group Abbot added 6¾p to 207¼p after picking up a series of North Sea contracts and extensions worth some $100m (£52m) over three years.

Telecoms parts firm Spirent fell 6½p to 62¼p amid a 10% slide in turnover at its service assurance division and warnings of no recovery until the latter part of this year.