By mid-afternoon the FTSE 100 was 0.3 points up on the day at 5,909.4. The mid-cap FTSE 250 fell 66.1 points or 0.7 per cent to 9,768.6, dragged down by losses for housebuilders and consumer stocks.
Oil prices reached new peaks on Friday after an unexpectedly high US unemployment rate triggered fears of a more prolonged slowdown and caused the dollar to lose ground against the euro and the yen. This led the S&P 500 index more than 3 per cent lower and caused losses in Asia.
Nymex West Texas Intermediate pulled back to $135 a barrel on Monday, but remained well within striking distance of Friday’s record, when it jumped more than $11 dollars to $139.12 a barrel – its biggest one-day gain ever.
Tony Hayward, chief executive of British oil giant BP, said oil prices were unstable because markets were not well supplied, countering the long-held view by Opec, the oil cartel, that there is adequate global supply. He added that increasing government taxation on the oil and gas industry led to less investment in new production.
British Airways continued its turbulent run, down a further 1.4 per cent to 230¼p due to its exposure to high fuel costs. Budget rival EasyJet fell 1.5 per cent to 303p. Carnival, the cruise operator which has heavy exposure to energy costs, lost 1.1 per cent to £18.25.
Housebuilders were among the leading fallers on growing concerns that they may be forced to write down the value of their land banks when they start to report earnings next month, sending the FTSE 250 sharply lower.