Market report: Friday close

By Mickey Clark for MailOnline
Updated: 09:04 EDT, 22 December 2006

Oil giant BP shrugged off early selling pressure to post a rise of 4½p at 571½p despite City concerns that it may be next in the Kremlin's firing line as it moves to reclaim Russia's extensive oil and gas assets.

The fears follow news that the Russians are paying rival oil explorer Royal Dutch Shell and its Japanese partners $7.5bn (£4.3bn) to buy out the Sakhalin-2 project in Siberia and hand control to Gazprom.

The deal was personally signed by President Putin as if to underline the country's determination. The message will have been taken on board by BP management, which has ploughedbns of pounds into its TNK-BP joint venture.

City brokers say that for Royal Dutch Shell, 1p firmer at 1797p, the Sakhalin-2 move will have repercussions for the company's oil assets which had to be written down by more than 20% two years ago. BP's operations in the region have already faced difficulties. Earlier this year, it received a heavy backdated tax charge and faced accusations over environmental issues.

Share prices generally traded within a narrow range during the shortened session. There was little appetite among City investors following a lacklustre performance on Wall Street overnight and the FTSE 100 index was up by just 6.3 points at 6190.0 by the lunchtime close of trading.

Marks & Spencer, 7p ahead at 721p, remains the pick of the sector for broker Credit Suisse, and looks to have had a great run-up to Christmas. Among leaders, InterContinental Hotels showed the way with a jump of 56p to a record 1217p, buoyed by talk that it could find itself on the receiving end of a 1500p-a-share offer from Dubai International Capital in the New Year.

Wall's ice cream-to-Tetley tea group Unilever also stood out with a rise of 12p to 1418p after UBS repeated its buy rating and lifted its target price from 1480p to 1595p.

Big Yellow ticked a further 14p better to a record high of 647p. Dealers say a few big buyers have been chasing shares of the self-storage warehouse operator higher in the belief it may utilise its extensive property interests by converting into a real estate investment trust in the New Year.

Anglo-Australian miners Rio Tinto, down 16p at 2649p, and BHP Billiton, 3p lighter at 919p, look set to lift the price of iron ore by 9.5% next year. They are still in talks with Chinese steel mills but are expected to settle for the same deal struck by Brazil's CVRD with China's Baosteel. China, now a major player in the steel market, will set the tone for pricing elsewhere including Korea's Posco and the big European mills.

'This will set the benchmark for next year's prices and the other mills will follow suit,' said Andrew Harrington, commodities analyst at Australia & New Zealand Bank.

But some customers are not happy. LM Chung, boss of Taiwan's China Steel Corp, said he was surprised at the size of the increase, saying expectations were that softer coking coal prices would have translated into a smaller rise.

Meanwhile, BHP's giant Cannington silver, lead and zinc mine reopened after being shut down following the death of a worker. The mine, the world's largest source of silver and lead, was closed on 15 December following the death of a 19-year-old electrician.