PARIS (REUTERS) - France's chief public prosecutor said on Tuesday a man arrested last week on suspicion of beheading his boss and trying to blow up an industrial gas plant would be kept behind bars pending an inquiry on terrorism charges.

Prosecutor Francois Molins announced the news at the end of an initial 96-hour custody following the arrest of Yassin Salhi, 35, who was arrested on the scene of the crime near the southern city of Lyon on Friday.

The severed head of his boss was found hanging on the fence of a site belonging to US-based gas and chemicals company Air Products, next to flags bearing professions of the Muslim faith.

Mr Molins said investigations in the four days since Salhi's arrest - notably evidence of contact with an Islamist militant in Syria - justified an inquiry on charges of suspected terrorism and not simply, as Mr Salhi argued, an assassination that was provoked by personal problems with his boss and wife.