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Motorists should brace themselves for rising prices at the pump. The cost of crude today shot up to a seven-month high of more than $71 a barrel as energy analysts forecast that the price could test $80 a barrel within the next couple of weeks.
New York crude was up 1.07 cents at $71.08 while in London the price rose 89 cents to $70.51, sending oil stocks soaring. The price has been driven up by shrinking US stocks and predictions demand has stopped falling. Investors were also buying up barrels as a hedge against the depreciating US dollar.
BP got a double boost as ING upgraded its shares from hold to buy and upped its price target to 565p. Analysts reckon the oil behemoth will reap the rewards of its restructuring programme. Its shares gained 103⁄4p to 5401⁄2p. But the broker is less fond of BG Group, 18p stronger at 1158p, cutting its price target from 1150p to 1050p. BG's shares have rallied sharply in the past six months, and ING reckons investors should take profits.
Shares in London were broadly marked higher on the back of a strong showing from commodity stocks. The FTSE gained 65.97 points to 4470.76 with the heavyweight miners contributing most of the gains. Eurasian Natural Resources stood out with a rise of 401⁄2p to 716p after saying at its AGM that sales and production volumes were ahead of management expectations. The Kazakhstan-focused miner said price pressures remain, but it is cutting costs to stay competitive. Citi advised clients to hang on to the shares, saying the company is in a currency sweet spot as the Kazakh tenge has devalued against the dollar. But the City big-hitter reckons a recovery has already been priced into the shares.
BHP Billiton gained 63p to 1557p despite saying it has slashed the price it charges steelmakers for coal.
It wasn't just black gold in the spotlight, as traders said that the falling dollar would push more investors towards gold itself. Peter Hambro Mining gained 18p to 650p while Anglo American, the world's largest precious metals miner, added 61p to 1833p.
Among mid-caps, a profits warning from engineering group Charter International sent its shares plummeting 105p to 459p. The company has warned that if the miserable trading it experienced in May continues, full-year profits will fall well below expectations.
Wall Street ended almost flat, the Dow closing 1.42 points lower at 8763.06 after another lacklustre session. The S&P 500 closed up 0.4% at 942.43. Chipmaker Texas Instruments put the spark into the technology sector after saying profits and sales in the second quarter would be above earlier forecasts.
Its shares jumped 6.3% to $21.02. Bank of America fuelled the optimism, jacking up its price target for Microchip Technology to $23 as it noted that orders from China are rising. The double helping of good news pushed Intel up 3.1% to $16.42 and Applied Materials up 1.6% to $11.03.
Commodity stocks were also on the rise, thanks to increasing prices for their products, with copper miner Freeport McMoRan advancing 4.4% to $58.96 and aluminium producer Alcoa 3.5% ahead at $11.15. But consumer-focused stocks were on the back foot after Procter & Gamble warned that the trading environment remained tough. Its shares fell 1.4% to $52.41.
The US Treasury's announcement that it would allow 10 of the nation's biggest banks to repay $68 million (£41 billion) from the government's asset relief programme failed to do much for financial stocks.
Shares in Asia returned to their winning ways. In Tokyo, the Nikkei Average ended up 204.67 points at 9991.49, to be within sight of the psychologically reassuring 10,000 barrier. Commodity stocks soared on the back of higher oil and metal prices. Shipping groups were also marked higher, with Mitsui OSK Lines gaining more than 5% as brokers said that the sector looks cheap.
In Hong Kong, the Hang Seng index put on 692.91 points to 18,751.40 amid optimism that the raft of economic data coming from China later this week will prove positive. According to reports in the Chinese press, industrial production rose by 8.9% in May on the previous year — well ahead of forecasts and the fastest rate of growth since September last year.
