Britain's top shares rose on Wednesday, lifted by oil majors BP and Shell after crude prices continued their seemingly inexorable rise, and as mobile operator 02 gained on take-over hopes and Yell benefited from optimism over an update on a probe into its UK business.
The FTSE, 100 share index ended up 41.1 points, or 0.8 percent, at 5,296.9, just off an earlier high at 5,300. The rise added to Tuesday's 28-point gain as stocks recovery from a steep four-day slide last week.
Shares in BP, Shell and BG Group made up about half of the market's gain as each stock gained more than 1.5 percent as crude prices remained around $70 per barrel, after supplies were hit by Hurricane Katrina in the United States.
Anais Faraj, a strategist at Nomura, said the market was increasingly inured to rising energy costs.
"There's not going to be inflation, there will not be growth collapse. What you will get is a different pattern of spending in people's basket of goods and services," he said. "For the market as a whole it's swings and roundabouts. As long as oil continues to ratchet up incrementally the market will go up. The fear is of a big spike."
Miners also benefited from high commodities prices. Anglo American led the sector with a rise of 1.8 percent.
Analysts said the prospect that high fuel and commodity costs will crimp economic growth remained a concern, but shares were taking that in their stride.
Yell topped the FTSE leaderboard with a 4.6 percent rise after competition regulators conducting a probe of its activities said they would consider the impact of other players in the market, including BT.
The Competition Commission said earlier this year it would examine Yell's strong position in the classified-directory industry, raising concern it could tighten the price cap the company operates under, but dealers said the latest update indicated any measures may not be too harsh.
"We remain positive on Yell and believe that the acquisition of TransWestern, further shifting the focus of the company towards the US market, has decreased the risk of an unfavourable outcome of the regulatory enquiry," Smith Barney analysts said in a research note.
Rumbling take-over activity also continued to lend support. Mobile phone operator O2 firmed 2.3 percent to 153-1/4 pence after investment bank Morgan Stanley lifted its target on the shares to 175p from 148p and said hopes of a bid would continue to underpin the shares.
And logistics company Exel was among the top blue chip gainers, adding 3.1 percent, boosted by persistent speculation of an imminent take-over, dealers said.
But plasterboard maker BPB ended flat at 731-1/2p after having drifted around par during the session after it rejected a 3.6 billion pound take-over approach from France's Saint-Gobain.
Saint-Gobain pitched its bid at 720p per share, as expected, and dealers said BPB's shares holding above that level reflects an expectation the French firm will raise its bid.
British support services company Serco led mid-caps higher with a 6.2 percent rise, after it said it expected mid-teens percentage growth through 2007 on the back of a strong order book.