Struggling Stocks Spur New Record Oil Prices

Oil hit another record of just under $143 as global stocks tumbled last week, with the Dow briefly dipping into bear market territory as investors sought safety in gold, government debt and the Swiss franc.

With one trading session left in June, U.S. stocks were headed to their worst month since September 2001, which marked the end of the last bear market -- typically defined as a 20 percent drop from a bull market's peak.

Crude surged to a new high of $142.99 per barrel Friday before paring some gains. Tumbling equity markets helped trigger a wider rally in commodities as investors took cash out of stocks and shifted to other assets that take advantage of inflation.

Oil has gained 47 percent this year, headed for the biggest six-month gain since 1999, as recession concerns have pushed the MSCI World Index of global equity markets down 12 percent.

"Certainly, there is a ferocious sort of bull market going on in energy and energy-related stocks," Michael Hartnett, chief equity strategist for emerging markets at Merrill Lynch, said Friday in Moscow. "Across emerging markets, we're still overweight those sectors that are sensitive to commodity prices going up," he said. "At some point there will be a big, big buying opportunity, but probably you need to see inflation abate somewhat first."

Hartnett said he was "bullish" on Russian stocks, even as inflation threatens to slow a decade of economic growth.

"It's practically the only threat," he said. "I remain very positive, very bullish on the Russian stock market."

Inflation in Russia hit an annual 15.1 percent in May, the highest level in more than five years, amid record fuel prices. Russia and Brazil are commodity-driven economies and are likely to outperform the other so-called BRIC countries, India and China, "in the immediate future," Hartnett said. The trend will reverse "at some stage in the second half," he said.

Despite the soaring oil prices, the country's top crude producers ended the week down. Rosneft, the Russia's largest oil producer, dropped 1.6 percent on the MICEX exchange, and top private producer LUKoil shed 4.6 percent. Gazprom Neft fell 2 percent.

Gold rose to a one-month high, lifted by oil's fresh spike and a drop in the dollar against the euro. The safe-haven Swiss franc rose to a three-week peak against the dollar after Central Bank first deputy chairman Alexei Ulyukayev said Friday that Russia planned to increase the currency's share in its $558.7 billion gold and foreign exchange reserves.

Rising gold prices also did little to help the country's producers from the overall downturn. Polyus, the country's top gold producer, fell 5.3 percent on the week, although it made back some of what it lost Thursday after electing a new board. Gold and silver producer Polymetal also made gains on the good news Thursday, rising 1 percent, although it ended the week down 4.1 percent.

Russia's markets both fell on the week, with the MICEX Index losing 3.5 percent to close at 1765.91 points and the dollar-denominated RTS Index dropping 2.8 percent to 2318.61 points.