BP shares rally to seven-month high

OIL giant BP helped the Footsie march to a near-2 per cent charge yesterday as London played catch-up with US gains on Monday.

BP was up 6 per cent after speculation that the energy company had been a takeover target for rival Shell at the height of last year's Gulf of Mexico oil spill.

IG Index senior sales trader Yusuf Heusen said: "Although some saw this as old news, it didn't dampen the appetite for BP, pushing the share price out to seven-month highs."

BP's rise helped the FTSE 100 index leap 113.93 points - or 1.9 per cent - to close at 6,013.87 in its first trading day of the year, making up the ground lost on Hogmanay.

Wall Street saw a more mixed performance in early trading, despite further good news from the US manufacturing industry as data showed factory goods orders rose unexpectedly in November.

The figures followed robust industrial statistics from America on Monday, which triggered a rally for markets and was mirrored in the UK yesterday after the Chartered Institute of Purchasing & Supply recorded the sector's strongest manufacturing performance in 16 years.

The welcome news gave the pound a boost, with sterling higher against most major currencies - up more than 1 per cent to €1.17 and 0.7 per cent to $1.56.

Among stocks, the focus was firmly on BP and Shell. Fears over liabilities from the disaster are thought to have prompted Shell to pull back from making an offer for its rival, but the speculation was enough to help BP shares rise 27.4p to 492.9p.

Analysts also noted comments from the lawyer in charge of BP's oil spill compensation fund that suggested payments could be half the expected level of $20 billion (13bn).

At the same time, renewed optimism over the global economy meant oil prices hit more than $90, near to a two-year high, before falling back.

Commodity stocks on the front foot included Eurasian Natural Resources up 33p at 1,081p and energy stock Tullow Oil ahead 47p at 1,308p.

Shell was 44.5p higher at 2,159.5p after the BP speculation, while Edinburgh-based Cairn Energy rose 11.6p to 431.6p after it said it would use two rigs to drill up to four exploration wells off Greenland this year.

Fellow Scottish oil and gas explorer Bowleven was up 16.5p or 4.4 per cent at 395.5p, while Faroe Petroleum was 5p or 2.8 per cent ahead at 185p.

Other significant risers included Royal Bank of Scotland, whose shares recovered from weakness over Christmas to lift 1.6p to 40.7p.

Next, which is due to update the City on its festive trading performance today, also rose - up 40p to 2,015p. Retailer Clinton Cards, which also reports today, was up 0.5p at 28p.

In corporate news, Blacks Leisure gave the retail sector an unexpected boost by posting December sales figures ahead of market forecasts.The cold snap helped increase like-for-like sales in its outdoor business by 10.2 per cent last month, despite strong comparative figures the previous year. Shares jumped 2.25p to 42.25p, up 6 per cent.

Sports Direct International, which has a 14 per cent stake in Blacks Leisure, rallied 4 per cent, up 5.7p to 166p.