OIL stocks powered London shares beyond the key 4500 barrier yesterday as traders returned to their desks after Easter.

Both BP and Shell recorded rises of more than two per cent on a day when the FTSE 100 Index closed 26.1 points higher at 4515.8.

Market morale was also lifted by hopes of a strong first-quarter earnings season, with more than ten per cent of S&P 500 companies due to report across the Atlantic this week.

But signs that the rally may be short-lived emerged in New York, where the Dow Jones Industrial Average slipped more than 50 points in early trading.

In London, Shell climbed 8.5p to 378p and BP cheered 8p to 490.25p after the price of a barrel of crude reached $38 in New York.

But analysts remained concerned that sky-high oil prices could ultimately weaken the global economic recovery, while fears of a deteriorating situation in Iraq were also adding to nerves.

The absence of news from market heavyweights in London was not dampening the spirits of investors as a clutch of blue-chip stocks racked up gains.

Flying high near the top of the risers was British Airways, with a 7.5p gain to 299.75p, while airports operator BAA climbed 6p to 533p after a record 133.4 million passengers used its seven sites in the past financial year.

The annual figure, which was almost six million higher than a year earlier, included a 10.4 per cent rise in traffic for March at 10.8 million passengers.

Elsewhere in the aviation sector, BAE Systems added 3p to 218p, while Rolls-Royce advanced 1.75p to 233p to continue its recent strong run since it won a deal to supply Boeing with engines for its new Dreamliner.

Retailer Marks & Spencer improved 1.25p to 276.5p ahead of trading figures from the company today. But other retailers featured high on the fallers board, including Kingfisher and Boots, down 1.75p and 7p to 283.25p and 635p.

There was considerable activity in the drugs sector, with GlaxoSmithKline losing 2p to 1106p.

FTSE 250 stock Acambis slipped nearly 13 per cent, or 47p, to 317p after suspending recruitment of additional volunteers for clinical trials of a smallpox vaccine.

Risers outside the top flight included Urbium, which advanced 5.5p to 564p after it told shareholders it had made a good start to this year. The owner of the Tiger Tiger chain of bars said first-quarter sales were ahead of last year.

Fashion chain Burberry also cheered five per cent, or 17.5p, to 372.5p ahead of releasing a trading update on second-half sales today.