BHP Billiton leads FTSE higher

The FTSE 100 has been given a lift by strong commodity prices, led by BHP Billiton which has won a $3.2 billion contract that underlines buoyant demand for natural resources.

The FTSE 100 was 30 points, or 0.66 per cent, higher at 4,571.2 at 12.47 p.m. yesterday. Mining stocks added seven points as BHP Billiton, the world's largest diversified miner, jumped 4.6 per cent.

"The problem is everyone tends to go the same way in these stocks so they can get squeezed up quickly. There's been more good news, but I'm not sure it justifies the move we've seen," one dealer said.

But rampant demand, especially from China, combined with dwindling physical metals stocks, looked set to drive commodity prices higher and sparked further gains across the spectre of metals stocks, traders said. Rio Tinto, Anglo American, Xstrata and Antofagasta rose 2.3 per cent to 3.5 per cent each.

Traders said mining companies, some of which have interests in oil, were also benefiting from record high crude prices. A quarter of BHP Billiton's fiscal-year 2004 operating profit comes from its oil business.

Crude oil futures climbed to new records over $50 per barrel after rebels fighting for sovereignty in Nigeria warned oil companies to shut production in the Niger delta before they declare war on October 1, raising a new threat to already tight global supplies and forcing investors to rethink oil-price assumptions.

Heavily weighted energy stocks added 13 points to the index. BP shares rose 2.2 per cent, Shell 0.9 per cent and BG Group 3.3 per cent.

With little in the UK corporate diary this week, the market looked set to drift on commodity price moves for a short time.

"We are getting to the stage where US companies are going to be pre-announcing third-quarter earnings," said Akber Khan, director of European equities at Deutsche Bank. "Perhaps the focus will move from the high oil price to company announcements."