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Worsening production woes in Nigeria and Britain took crude oil to new record highs before it pared gains to close higher Monday. Metals prices also rose.

In agricultural markets, U.S. corn futures hit record highs and wheat rose as well, while soybeans fell.

Other food-based commodities saw mixed fortunes, with U.S. arabica coffee up and cocoa and sugar down.

The Reuters-Jefferies CRB index of 19 commodity futures climbed a modest 0.4%.

Crude oil aside, commodities were reacting to a slightly weaker dollar amid speculation that the Federal Reserve may cut interest rates this week to prop up the economy.

Investors in financial markets are broadly expecting the Fed to cut benchmark borrowing rates by a quarter-point Wednesday, as some analysts think America still faces threats of recession from a festering credit crisis.

In oil, U.S. crude settled up 23 cents at $118.75 a barrel after hitting a record $119.93 the second time in a week that it came just short of the $120 mark eyed by bulls.

London Brent crude settled up 40 cents at $116.74.

Crude prices have surged more than 400% since 2002 and are up almost 25% since the start of the year, as global supplies struggle to keep pace with rising demand in emerging economies such as China.

The latest run-up is mainly due to problems in Nigeria and Britain, which have taken down nearly 2 million barrels per day of oil output in the Atlantic Basin.

In Britain, the 700,000 bpd Forties North Sea crude oil pipeline remained closed Monday due to a strike at the 210,000 bpd Grangemouth refinery over pensions.

The rally in oil helped U.S. gold futures for June delivery settle up $5.80 at $895.50 an ounce on the Comex division of the New York Mercantile Exchange.

Among industrial metals, copper prices closed slightly higher Monday, helped by a nearly two-week-long strike at Chile’s Codelco, the world’s largest copper producer.

Comex’s most-active copper futures for May settled up 2.00 cents, or 0.51%, at $3.9355 per pound in New York, after trading between $3.8970 and $3.9500.

Copper for delivery in three months on the London Metal Exchange closed up $75 at $8,650 a metric ton. It had hit a three-week low of $8,370 on Friday.

The front May corn contract settled up 22 3/4 cents at $6.00 per bushel on the Chicago Board of Trade. New-crop futures for December delivery climbed 23 1/2 cents to settle at $6.30 1/4.

The anecdotal evidence that China is diversifying its forex exposure away from the Dollar continues to mount. To date, most of the focus has centered around the Central Bank of China, which is passively diversifying its reserves into European and higher-risk assets. Apparently, Chinese exporters are also getting nervous about the impact of a falling Dollar on their respective bottom lines. The RMB has risen 11% since the beginning of 2007, which means Chinese companies now receive 11% less on sales to destinations abroad than they did for equal-priced goods in 2007. As a result, some companies have taken to quoting prices in Euros or to adjusting Dollar-denominated prices every few months. Other companies are building assumptions of a more valuable RMB into their profit models, and setting prices accordingly. The New York Times reports:

We are gradually increasing our emphasis on the domestic market until we can forget about the export market, because the profit margins on exports are so thin, [said one exporter].

Read More: «www.nytimes.com»

Concerns about rising prices have also leapt with 60% of fund managers expect core inflation to rise in the next 12 months - compared to 7% in April. This prompts predictions of higher bond yields with a staggering 80% of investors expecting long-term rates to increase in the next 12 months.

David Bowers, independent consultant at Merrill Lynch, said: ‘Evidence is pointing to a possible sell off in bonds as inflation worries mount,’ he says: ‘A sharp rise in bond yields could help convert this financial crisis into an economic crisis.’

Eurozone investors remain enthusiastic on the commodity trade. Oil and gas, seen as inflation proof, extended its position as Europe’s favourite sector with 41% of investors - an increase of 20% from April.

Karen Olney, chief European strategist at Merrill Lynch, said the need for commodities in developing markets, not labour, are scarce resources in a slow down - bringing with it pricing power. She says: ‘Earnings momentum drives-out performance - not value.’

The other three biggest movers in popularity were chemicals, construction and the industrials with losers being anything linked to the credit binge and/or reliant on the overstretched Anglo-Saxon consumer.

In the UK, cash remained king with managers continuing to hold record amounts on the sidelines. Only 7% of managers now see the UK market as undervalued, compared with 53% two months ago. Following the trend, UK managers no longer saw outlook for growth as the main problem with only 60% now believing the economy will weaken in the year ahead - down 12% from last year. Rather, concerns lie with the impact of higher oil prices and weaker sterling on inflation.

Continuing worries about the UK banks sector has prompted a switch to oil stocks. Last month a quarter of UK investors said banks were undervalued - that number now has fallen to zero. Olney said: ‘Banks are being penalised for earnings decay. While still unloved, this month they are no longer seen as cheap.’

Banks in crisis

The Merrill Lynch survey included 191 fund managers around the world who between them managed a total of about 315bn in assets.

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‘There are box-office smashes like The Simpsons Movie and The Bourne Ultimatum, then good family stuff like Harry Potter 5 and Shrek 3 along with some good TV series box sets.’

Forced to report his first-half figures bang in the middle of the group’s most important selling period, Fox was being fairly cagey about current trading.

He said: ‘The big days are still ahead of us. November and December account for 40% of our annual sales, and each week within those months sees a 25% rise on the previous one. We’re well-prepared, and all I can say is that we are exactly where we expected to be in terms of current trading.’

If that’s the case, Fox - brought in from Comet just over a year ago - is starting to counter the ever-growing competition from supermarkets and downloads in its traditional markets. He is also shaking up sister bookshops chain Waterstone’s.

Today’s results, for the half-year to 26 October, show HMV reducing losses, cutting costs and shifting into higher-growth sales areas such as video games and MP3 and MP4 players.

Pre-tax losses fell from 29.2m to 28.1m. sales, excluding the sold-off Japan operation, are up 9.5% at 729m. Group sales, which dropped 6.1% a year ago, rose 5% this time.

The biggest improvement came at the HMV chain itself, where like-for-like sales are up 9.2%. That reflects the shift into technology, which accounted for 6% of sales, and gaming, with 15%. HMV has had to accept lower margins on sales of games consoles such as the Wii and PlayStation 3 in the hope the next three years will produce good sales of higher-margin gaming software. New-format stores have been tested at Merry Hill in the West Midlands and Tunbridge Wells in Kent.

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They are lighter and brighter than HMV’s traditional grey-and-purple look, and include a central hub of iMacs where customers can play games and download music.

Fox said: ‘It’s early days yet, but the first indications are good with better footfall and more spending. We plan to open another five early next year, including two at Heathrow Terminal 5.’

Waterstone’s sales were virtually unchanged if one excludes the launch of the final Harry Potter novel, which added 2% to the chain’s revenues. Fox is halfway through closing 10% of Waterstone’s outlets following its takeover of rival Ottakar’s last year.

His launch of a Waterstone’s loyalty card has gone well with 700,000 customers signed up since September.

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Directories giant could be the next to ask investors for a bail-out as the advertising market goes from bad to worse.

The Himalayan debt mountain built up by the Yellow Pages owner took centre stage after newspaper group shocked investors with a 212m cash call.

An alarming slide in the adverting market since the end of February forced the hand of the owner of the Scotsman and Yorkshire Post owner.

But experts say that if Johnston Press has caught a cold, Yell could soon come down with the flu.

The talk is that Yell’s full-year results next Tuesday could contain more than just another dose of dire trading news.

And if the ad market gets any worse Yell may be forced to raise some fresh cash of its own, according to industry sources.

The parallels between the Yell and Johnston Press are striking.

Both are heavily dependent on small businesses, which are slashing advertising spending as the economy grinds to a halt.

Property and used car ads have plunged by over 10pc since the start of the year, said Johnston Press, which can only spell bad news for the listings in the Yellow Pages.

Both groups are also heavily indebted as a result of acquisitions sprees.

Yell’s debts now stand at 3.7bn after building up a directories empire in the US and Spain in 2005 and 2006. Not long after the firm arrived, the property markets in the US and Spain started to crash, dragging the economies down with them.

Yell shares plunged 14p to 188p, and have now lost 70% of their value since a calamitous profits warning this time last year. Johnston Press crashed 20p to 115p, while fell 13p to 249p and ‘A’ shares lost 19p to 421p.

The FTSE 100 finished up becalmed at 6,216, gaining just 4 points on the day after another feeding frenzy in the mining sector offset steep losses in the media and banking sectors.

Wall Street opened over 100 points higher on the back of some relatively benign inflation figures, suggesting there is scope for then US Federal Reserve to cut interest rates again. But the prospects for further rate cuts this side of the pond were dealt a heavy blow by the Bank of England’s doom-laden inflation report.

In the rampant mining sector, rallied 98p or 4.9% to 2118p on revived talk that Chinese aluminium giant Chinalco is quietly building up a 10% stake. BHP bid target rose 238p to 6881p.

Drugs giant gained 39p to 2130p after the American authorities sanctioned the use of its schizophrenia pill Seroquel for treating bi-polar disorder.

It was a sea of red in financials following a U-turn of staggering proportions from (down 14p to 144p) over a 300m cash call. in the growing queue for a bailout could be , which dropped 13p to 445p. Citigroup slapped a ’sell’ rating on A&L, arguing that a ‘marked deterioration’ in its loan book will tear apart its already fragile balance sheet.

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dropped 14p to 470p amid concerns it might struggle to drum up interest in its own given the growing list of companies asking for a handout. IT services firm fired up dealing screens following a robust first-quarter trading update. New boss Andy Green reckons the tech firm has remained resilient in the face of an economic slowdown despite ‘a few examples’ of slower spending.

Price comparison website .com climbed 3p to 118p after blue-blooded broker Cazenove gave it a prominent position on its ‘ outperform’ rankings.

Vaccine developer held out some hope for hay fever sufferers. Its shares blew 6p higher to 34p after trumpeting stellar trial results for a vaccine it claims will wipe out the summer snuffles.

Mining minnow gushed up 1p to 14p after confirming that a number of oil majors want in on a test field in Colombia.

Biofuel producer rose 8p to 553p after doubling first-quarter profits on the back of soaring energy costs.

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