Market report: Monday close

LEADING shares closed broadly weaker in reaction to another surge in the oil price after the killing of a key Iraqi leader.

However most stocks were off session lows as by the end of trade, matching a rally from lows on Wall Street after the US military reported finding a sarin artillery shell in Iraq.

The FTSE 100 ended down 38.8 points to 4,403.0, a fall of 0.87%. The index had earlier touched a low of 4,363.0, its weakest reading since late March.

All London's wider indices ended sharply lower, with technology stocks pressuring the FTSE 250 to a fall of 98.1 points to 5,883.0.

But volumes were average, with few dealers reporting panic selling: some 2.23bn shares had changed hands.

Meanwhile, the DJIA was down 79.73 points to 9,933.59 - above its session low of 9,863.19.

This earlier retreat followed another jump in oil prices and a retreating US dollar, after Iraqi Governing Council chief Izzedine Salim died in a suicide attack.

News of bomb blasts outside branches of the HSBC bank in Turkey ahead of a visit by prime minister Tony Blair also created jitters.

However, indices on both sides of the Atlantic moved off lows late in the day after the US reported its first potential find of weapons of mass destruction in Iraq. The military claimed an artillery shell had exploded releasing a small amount of the nerve agent Sarin.

Telecoms and media stocks were under pressure among the London markets as investors reduced exposure to the higher-risk, more volatile sectors. Sage Group, Reuters, WPP and BSkyB were all lower.

US dollar earners such as Rolls Royce and BAE Systems fell, as did financial shares including Standard Chartered following a stock market crash in India.

Enterprise Inns was another notable faller ahead of interim results tomorrow, with worries still overhanging after the UK Trade and Industry Committee's decision last week to investigate the relationship between tenanted pub companies and their tenants.

Heightened fears over world security dragged on cruise operator Carnival and hotels and gaming firm Hilton, despite a strong trading statement from the latter's bookmaking peer William Hill.

British Airways meanwhile ended slightly lower after full year results showed underlying earnings matching expectations. The group also raised its guidance for fuel price rises in 2005.

Defensive stocks provided the main upside features among the blue chips, with Imperial Tobacco, Scottish & Newcastle and Severn Trent all gaining less than 1%.

Tesco was another FTSE 100 riser after Cazenove repeated 'buy' advice, with the broker arguing that a supermarket price war would only cement the group's market-leading position.

Pennon led the midcap risers after the utility rejected a bid approach led by Terra Firma, the investment vehicle of Guy Hands, which was reportedly worth £1bn. It also revealed the possible acquisition of UK landfill assets from waste disposal firm Shanks.

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