Resources pull stocks up

Australian shares rose 0.9% on Friday as high oil prices boosted energy companies including Woodside Petroleum, though investment company Babcock & Brown slumped for a second day on concerns about its debt.

But the benchmark index posted its worst weekly drop in more than three months as concerns about credit-related losses resurfaced and as high oil prices sparked concerns about rising inflation and slowing economic growth.

"Credit markets still look fragile and the inflation and growth issues are not going to go away,'' said Greg Goodsell, equity strategist at ABN AMRO.

"Markets are going to remain volatile because we've got those strong headwinds coming our way at the moment.''

Shares in Babcock & Brown slumped as much as 31.9% to a new all-time low of $4.70 on concerns that creditors would review its debt covenants after its market capitalisation fell below a trigger point.

The benchmark S&P/ASX200 index rose 48.9 points to 5378.1, based on the latest available data, after falling 2.5% to a two-month low in the previous session.

The index, which fell 3.8% on the week to log its fourth consecutive weekly fall, has lost 15.2% since the start of the year after rising 11.8% in 2007. It is now 5.7% above its 2008 closing low of March 18.

New Zealand's benchmark NZX-50 index fell 0.7%, or 23.22 points, to 3416.00, taking total losses since the start of the year to 15.5%.

The most heavily weighted stock, Telecom New Zealand, closed up 1.3% at NZ$3.78.

Energy companies rose as oil prices remained above $US136 a barrel on Friday, after hitting a record high of $US139.12 last week.

BHP Billiton, Australia's biggest oil and gas producer, rose nearly 3% to $43.04 and Woodside Petroleum gained 2.9% to $63.00.

Gains in both companies accounted for about half of the market's rise on Friday.

Babcock & Brown closed down 23.9% at $5.25 as concerns mounted about the company's debt and ability to raise funds.

Shares in other listed funds managed by Babcock & Brown also fell, with Babcock & Brown Power falling 21.1% to 71 cents, while Babcock & Brown Infrastructure was down 12.3% at 75 cents.

Babcock & Brown's larger rival, Macquarie Group, Australia's biggest investment bank, fell 3% to $49.17.

Elsewhere, television broadcaster Ten Network Holdings fell 10.4% to $1.765 after it said deteriorating economic conditions would cut 2008 earnings from its television business by about 10% over the previous year.