Market Report: Oil stocks help blue chips break 5,000 barrier

Blue chips roared through the 5,000 barrier yesterday having spent the previous two sessions flirting with the psychologically important level. They were boosted by a strong start to trading on Wall Street where the latest manufacturing data soothed worries about inflation in the world's biggest economy and raised hopes that interest rates may be peaking.

Blue chips roared through the 5,000 barrier yesterday having spent the previous two sessions flirting with the psychologically important level. They were boosted by a strong start to trading on Wall Street where the latest manufacturing data soothed worries about inflation in the world's biggest economy and raised hopes that interest rates may be peaking.

The FTSE-100 finished 47 points higher at 5,011, topping off a great month for the index. Over the past four weeks it has gained 200 points, or 4 per cent. Yesterday, oil majors did particularly well thanks to a buoyant crude price. It hit a three-week high of over $52 per barrel and helped Shell to put on 9p to 486.5p, BP rise 11p to 562p and BG add 12.25p to 429p.

BSkyB was not so lucky. It dropped 10p to 535.5p after Morgan Stanley warned investors that competition for the satellite broadcaster will materially increase in the coming years. The US broker believes this will come from the growing success of Freeview, broadband internet and the resurgent cable industry. BSkyB has come up against limited competition in the past and this lack of a viable consumer alternative has allowed the company to spend little on keeping subscribers. However, the broker fears that this is about to change and predicts that the broadcaster will have to battle harder and invest more money if it is to hold on to customers.

Morgan Stanley also forecasts that it will cost Sky more to win new customers going forward. And even with greater investment the satellite broadcaster will probably struggle to hit its targets. The broker said: "We no longer believe that BSkyB will hit its 10 million customer target in 2010. Hence, we are downgrading our estimate of medium-term subscriber growth and now forecast that Sky hits 9.4 million in 2010."

Meanwhile, as the UK economy slows and households trim their budgets, Morgan Stanley suggests that things are bound to get tougher for Sky. It has therefore downgraded its earnings forecasts for 2006 by 8 per cent and for 2007 by a whopping 33 per cent. The broker also set a price target of just 480p on the stock and urged investors to abandon it.

Reckitt Benckiser found itself at the opposite end of of the FTSE 100 leaderboard, gaining 47p to 1,727p, as brokers highlighted market research data which showed that business is booming across the company's European operations. This follows a strong first-quarter performance by the company. According to the data compiled by the research company AC Nielsen, Reckitt's European businesses experienced a 14 per cent rise in sales during the past four weeks, which is twice the previous period's growth rate. Bright spots for the household goods group included Germany and France.

Another day of brisk trading in Egg meant that bid rumours continued to circle the internet bank. Shares in the group rose 4.25p to 144.75p on volume of 13.2 million shares, which is more than four time the average for a normal session. Similarly, Pilkington's 6.25p rise to 122p, in heavy trading, also sparked talk of a possible bid for the glassmaker.

Go-Ahead lost 54p to 1,296p as JP Morgan cut back its rating on the transport group all the way to "underweight" from "overweight". It told clients that there are signs of a slowing sales environment in the company's bus markets. This is bad news for Go-Ahead, which is increasingly up against rising costs due to higher fuel and wage expenses.

Lower down the pecking order, QXL Ricardo slumped 131p to 2,823p on rumours that the online auctioneer is planning a sizeable rights issue. Market professionals noted that the company recently indicated that it was looking at ways to finance its future development and argued that now would be a great time for it to raise fresh cash. QXL shares have soared from 330p since November thanks to a series of bid approaches and continuous stake-building by the Israeli Izaki Group.

"At this stage there are no formal plans in place to raise additional funding," said the loss-making online auctioneer, which at its last results had a cash pile of just £1.3m.

BTG added 7.5p to 147.75p as the intellectual property group started its roadshow of the City. Yesterday it was heard to have made a well-received presentation at Credit Suisse Asset Management. Civica put on 3p to 212.5p as punters moved into the company ahead of its results later this month. Gossips are convinced that the software group's figures will not disappoint the City.

Finally, Imperial Energy, 12.5p higher at 362.5p, continued to outperform rival AIM-listed oil and gas players after unveiling yet more bullish drilling data.