Global stock markets extended a post-Christmas rally yesterday despite more bad US economic news and a growing energy dispute between Russia and Ukraine which lifted oil prices in London above $50 a barrel.

Energy markets were rattled after the huge Russian energy group Gazprom cut back on gas supplies to Ukraine, a key transit route for Europe-bound natural gas, over a payment dispute, affecting deliveries to Western and Central Europe as well as the Balkans. Paris-based GDF Suez, Europe's largest natural gas distributor, said deliveries of Russian natural gas via Ukraine to France fell by more than 70%.

In the UK, gas for delivery today traded 7.75p per therm higher at 68.50p, down from a session high of 73p, the highest level since late October.

The disruption in supplies to Europe sent oil prices above $50 a barrel in London dealing. West Texas crude settled at $48.58 a barrel in New York.

US stocks moved ahead cautiously with investors looking for signs that the recession was easing. Strength in techs blunted concerns about weak data on factory orders and pending home sales.

Weaker-than-expected new orders received by US factories in November, however, signalled gloomy prospects for the struggling economy and corporate profits, while pending sales of existing homes plunged to a seven-year low in the same month.

In the credit markets, the cost of three-month loans between banks fell further ahead of expected interest rate cuts from the European Central Bank and Bank of England.

The interbank lending rate on three-month loans in dollars - the London Interbank Offered Rate - fell 0.01 percentage points to around 1.41%, according to the British Bankers' Association.