Overview: the FTSE 100 declined 0.2% today despite strong gains in the insurance sector as major mining stocks reversed gains into losses, dragging the blue chip index down. The markets got positive news late in the session when it was reported that the University of Michigan consumer sentiment index rose to 69.6 in August from 67.8 in July. In other news, US retail sales rose 0.4% in July, while investors were expecting an increase of 0.5%.
Insurer Aviva (LON:AV) took the lead among the blue chips with a 6% gain. Tour operator TUI Travel (LON:TT) added 4%, while other insurers Standard Life (LON:SL) and Legal & General (LON:LGEN) climbed 3%. Banking group Barclays (LON:BARC) followed, advancing 2.2%. Pharmaceutical company GlaxoSmithKline (LON:GSK), interdealer broker ICAP (LON:IAP) and asset management firm Schroders (LON:SDR) tacked on more than 1.5%.
Indian base metal focused miner Vedanta Resources (LON:VED) was the heaviest faller in the FTSE 100 with a 5% decline. Plumbing and heating equipment manufacturer Wolseley (LON:WOS) declined 2.8% and Home Retail Group (LON:HOME) lost 2.5%. Cruise operator Carnival Corp (LON:CCL) and clothing retailer Next (LON:NXT) lost just over 1.5%. retailer Kingfisher (LON:KGF), Scottish & Southern Energy (LON:SSE) and defence and aerospace systems manufacturer BAE Systems (LON:BA) rose 1.5%.
US stocks were off to a flat start. The Dow Jones Industrial Average and the broader S&P 500 index were unmoved, while the technology heavy NASDAQ composite retreated 0.3%.
Commodities
Oil prices rebounded from yesterday’s declines today despite further declines in equity markets ahead of today’s US data, which will include US inflation figures and the University of Michigan consumer sentiment index for August. Crude futures were supported by this week’s inventories reports, which revealed further reductions in US crude stockpiles, and Germany’s GDP data.
Germany said its GDP expanded at an annualised rate of 2.2% in Q2, marking the largest quarterly gain since the reunification. The update boosted the euro, helping it to gains against the US dollar and bolstering oil prices. A weaker greenback makes dollar denominated commodities such as crude cheaper for holders of other currencies, increasing demand.
The markets took another hit yesterday when the US Labor Department reported a 2,000 gain in initial jobless claims, which reaches five month highs at 484,000. Analysts polled by Reuters expected a decline to 465,000. Continuing claims dropped from 4,570,000 to 4,452,000. This update followed last week’s jobs data that showed a decline of 131,000 in non-farm payrolls in July, while June’s losses were revised upwards from 125,000 to 221,000, raising concerns about the strength of the ongoing economic recovery in the US and the outlook for global energy demand.
September Brent Crude rose to US$75.85/barrel, while US light, sweet crude for September delivery climbed to US$75.94/barrel.
Blue chip oil and gas producers were mixed today. BP (LON:BP) declined 1.9%, while fellow supermajor Shell (LON:RDSB) dropped 1.6%.
Cairn Energy (LON:CNE) did better, climbing 1.2%. BG Group (LON:BG) also managed to stay in the positive with a small gain.
Tullow Oil (LON:TLW) was flat.
Amec (LON:AMEC) was unmoved, while another oil and gas engineering firm Petrofac (LON:PFC) was sitting just below the opening level.
Midcaps were headed in different directions today. Dana Petroleum (LON:DNX) was the top performer in the sector in the FTSE 250 with a 2.8% advance. Premier Oil (LON:PMO) rose 1% and JKX Oil & Gas (LON:JKX) followed with a small gain.
Dragon Oil (LON:DGO) and Soco International (LON:SIA) were in the red with 1% losses. Salamander Energy (LON:SMDR) and Heritage Oil (LON:HOIL) shed 1.3% and 1.8% respectively, while Melrose Resources (LON:MRS) was at the bottom of the pile with a 2.8% decline.
Wood Group (LON:WG) was flat. Fellow services company Wellstream Holdings (LON:WSM) lost 1%.
US focused oil and gas junior Caza Oil & Gas (LON:CAZA) led the markets, soaring 150% after making potential oil and gas discoveries on its Bongo prospect in Texas.
Energy investor Xtract Energy PLC (LON:XTR) did well, rallying 10%.
Europa Oil & Gas (LON:EOG) and Iraq operating Irish oil company Petrel Resources (LON:PET) moved in the opposite direction, shedding 6% and 5% respectively.
Gold keeps rising on safe haven demand
Gold extended gains today as demand for safe haven assets remained high after yesterday’s report from the Labor Department revealed a surprising increase in initial jobless claims in the US.
The yellow metal reached record highs in US dollar terms at US$1,265/oz in June with the safe haven demand being driven by concerns over Europe’s debt crisis and the slowing economic recovery in the US. The worries over the US economy were reinforced by the data released over the past two weeks along with the Fed’s decision to leave the current ultralow interest levels unchanged and buy more US debt.
Investment bank Goldman Sachs (NYSE:GS) said yesterday that gold prices could reach US$1,300/oz within the next six months.
Gold reached US$1,214/oz, while silver and platinum climbed to US$18.07/oz and US$1,525/oz respectively.
Major mining stocks were in decline today.
Gold miners Randgold Resources (LON:RRS) and African Barrick Gold (LON:ABG) declined 1%, while peer form the FTSE 250 Petropavlovsk (LON:POG) lost 1.2%.
Silver miner Fresnillo (LON:FRES) and platinum miner Lonmin (LON:LMI) shed 1.3% and 1% respectively.
Specialty chemicals firm Johnson Matthey (LON:JMAT) moved down 1%.
Silver producer Hochschild Mining (LON:HOC) declined marginally, while fellow midcap Aquarius Platinum (LON:AQP) went against the tide, posting a small gain.
Africa operating gold miner GMA Resources (LON:GMA), junior diamond miner Stellar Diamonds (LON:STEL) and Russia focused Ovoca Gold (LON:OVG) followed the majors, slipping 9%, 6% and 5.5% respectively.
UK-registered China operating copper and gold miner Central China Goldfields (LON:GGG) outperformed the sector, advancing 6%. Turkey focused gold miner Ariana Resources (LON:AAU) and Turkey and Ethiopia operating gold miner Stratex International (LON:STI) also did well, gaining 5%.
Falling base metal prices hit miners
Base metals moved lower with copper and nickel sliding to US$3.26/lb and US$9.64/lb respectively. Zinc held steady at US$0.91/lb.
BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) managed to stay in the black with small gains. Other base metal miners were in decline.
Anglo American (LON:AAL) and Antofagasta (LON:ANTO) declined marginally. Eurasian Natural Resources (LON:ENRC) and Xstrata (LON:XTA) lost just over 1%, while Kazakhmys (LON:KAZ) dropped 1.7%.
Vedanta Resources (LON:VED) was the heaviest faller among the majors with a 5.7% loss.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) moved with the sector, shedding less than 1%.
Junior companies didn’t show much movement today. Botswana operating nickel and copper miner Discovery Metals (LON:DME) outperformed the sector, gaining 6.5%.
Banks, insurance private equity
Banking stocks were mixed. Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS) gained 2% and 1% respectively, while HSBC (LON:HSBA) and Standard Chartered (LON:STAN) declined 1.4%.
Lloyds (LON:LLOY) declined marginally.
Insurance companies did better. Aviva (LON:AV) emerged as the top performer with a 5.5% gain. Legal & General (LON:LGEN) and Standard Life (LON:SL) tacked on more than 3%.
Prudential (LON:PRU) and Old Mutual (LON:OML) added less than 1%.
RSA Insurance Group (LON:RSA) went against the tide, declining 1%. Car insurer Admiral Group (LON:ADM) posted a small loss.
Private equity group 3i (LON:III) dropped 1.5%.
Small Cap Movers
Other notable movers among the small caps included mobile email and data synchronisation group Synchronica PLC (LON:SYNC) with a 12% rally and supplier of human tissue and human tissue-based research services Asterand (LON:ATD), which rallied 7% and novel pesticides and plant nutritional products developer Plant Impact (LON:PIM) with a 6% loss.
Small Cap News
Shares in Caza Oil & Gas (TSX:CAZ, LON:CAZA) more than doubled in value after the group revealed it had made a potentially significant natural gas discovery in Texas.
In a trading update, ahead of its interim results, Norcon (LON:NCON) said it has successfully maintained significant client retention levels in the first six months, with continuing demand from both existing and new clients. For the half ended 30 June, the company anticipates revenues to come in within 5% of expected levels, with a US$3.5m net cash uplift compared with H109, and margins are expected to be consistent with prior years.
Singapore-based Alternative Energy Ltd (LON:ALR) said its wholly owned subsidiary Alternative Energy Holdings Ltd, has agreed to enter into a joint venture in China with Jia Shan Jia Yin Dian Zi Keji You Xian Gongsi (Jia Shan) for the design, development and manufacture of energy saving LED lighting products.
This morning, after shares surged over 20% yesterday, African Diamonds (LON:AFD) confirmed that it has received an unsolicited takeover proposal from an unnamed bidder. However the offer, at an undisclosed price, fell short of the board’s valuation.
Mediterranean Oil & Gas (LON:MOG) told investors that its Ombrina Mare project may be exempt from the Italian offshore drilling ban which comes into effect on 26 August 2010. Earlier this week, a Legislative Decree amending the Italian Environmental Code was published in the Official Journal of the Italian Republic.
Nautical Petroleum (LON:NPE) told investors that it has spudded the Kraken appraisal well on North Sea Block 9/2b, and it expects the ‘full programme’ to take 45 days to complete. The drilling work is being supported by the company’s recently announced £30m placing.
Bio-pharmaceutical group Lipoxen (LON:LPX) has announced that its founder and current Chief Scientific Officer (CSO) Gregory Gregoriadis has received a special and prestigious Founders Award in recognition of his 40 years of founding the field of liposomes in the delivery of drugs and vaccines, and its promotion over the decades.
European Nickel (LON:ENK, ASX:ENK) said Buprestid Pty Ltd, of which Mark Hanlon, finance director of the company, is a director, trustee and member, bought 50,000 European nickel shares at A$0.36 each.
Rurelec (LON:RUR) has agreed amendments to the terms of unsecured convertible loan notes, which the company believes will assist it in the re-financing of its Argentine subsidiary Energia del Sur S.A. (EdS). The loan note holders have agreed to roll-up the payable interest, until maturity on the 31st March 2011, and the conversion price has dropped from 25p per share to 13.75p.
Europa Oil & Gas (LON:EOG) told investors that Dr Erika Syba - the company’s co-founder, operations director and second largest shareholder - has resigned from her position as of the 31st August 2010. "As co-founder of the company with 15 years of service Erika has contributed greatly to the development of Europa”, Europa MD Paul Barrett commented.
Edison Investment Research was encouraged by a recent operational update from Africa operating gold and platinum miner Goldplat (LON:GDP), which it said confirmed its steady progress with both of its gold recovery plants in South Africa and Ghana operating in line with expectations, while production in Kenya is expected to commence shortly.
Berkeley Mineral Resources (LON:BMR) has conditionally placed 136.6 million shares to raise £2.05 million in order to exercise the option to secure the rights to process the remaining tailings dumps acquired at the Kabwe mine in Zambia, as announced in June.
Oil and gas explorer BPC (LON:BPC) has said that the preliminary results of its 2D marine seismic survey over its southern licenses in the Bahamas adjacent to Cuban waters showed various possible “direct hydrocarbon indicators".
Large and Mid Cap News
UK-listed oil giant BP (LON:BP) has been dealt another expensive blow in the US, relating to compensation and penalties stemming from an explosion at the Texas City refinery. BP’s North American refining business - BP Products North America - has now agreed the settlement of 270 out of a total of 709 citations following the explosion and fire at the Texas City Refinery in March 2005 that killed 15 workers and injured 170 others.