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FTSE 100 shed 0.7% as miners decline despite higher prices, S&P 500 and NASDAQ inch lower

Published: 15:07 30 Apr 2010 BST

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Overview: the FTSE declined 0.7% today despite positive developments in the Greek debt crisis. The index was dragged down by banks, oil and gas companies and miners, which were in decline today despite higher oil and metal prices.

The US GDP update revealed an annualised 3.2% growth in Q1.

InterContinental Hotels Group (LSE: IHG) led the blue chips, climbing 2.5%. Software developer Sage Group (LSE: SGE) climbed 2%, while oil and gas producer BG Group (LSE: BG), retailer Kingfisher (LSE: KGF) and chipmaker ARM Holdings (LSE: ARM) all added 1.7%. Publisher Pearson (LSE: PSON), packaging group Rexam and communications group WPP (LSE: WPP) climbed 1.4%.

Banking group Barclays (LSE: BARC) was at the bottom of the index with a loss of almost 6%. Base metal miner Rio Tinto (LSE: RIO) and defence and aerospace systems manufacturer BAE Systems (LSE: BA) followed, shedding 3.6% and 3.1% respectively.

US stocks didn’t show much movement in early trade. The Dow Jones Industrial Average was flat, the broader S&P 500 index slid 0.1% and the technology heavy NASDAQ composite declined 0.2%.

Commodities

Oil prices advanced, gaining from rising gasoline demand in the US and Greece's plans to implement a package of large scale austerity measures to satisfy the European Union and the International Monetary Fund (IMF) to secure a multi-billion euro bailout that is the debt-laden country’s only hope to prevent a default that could come as soon as in three weeks. Eurozone finance ministers are set to meet this weekend to discuss Greece's plight.

Greece has asked the EU and the IMF to trigger the aid mechanism that the sides agreed to earlier this month after Eurostat revised Greece’s 2009 budget deficit to 13.6% from the previous 12.9%, leading major rating agencies to downgrade Greece’s debt and make it almost prohibitively expensive for the country to raise money in the market.

Moody’s downgraded Greece, while Standard & Poor’s did the same, also cutting other euro zone members Portugal and then Spain.

Germany then said it would only provide money if Greece puts together a convincing plan to reduce budget deficit through pay cuts and higher taxes, causing the yield on Greece's two year bonds to soar to over 20%.

The original deal was for €45 billion in aid, however, it could now go up to €120 billion over three years.

Oil prices shook off further build-ups in US crude stockpiles that were reported by both Energy Information Administration (EIA) and the American Petroleum Institute (API) this week. EIA said that crude inventories added 1.96 million barrels, while API said that their rose by 5.3 million barrels. However, EIA said that rising gasoline consumption in the US led to a drawdown of 1.24 million barrels.

Further movements in crude prices will depend on the US Q1 GDP data that is due out today.

June Brent Crude rose to US$87.24/barrel, while US light, sweet crude for June delivery improved to US$85.42/barrel.

Blue chip oil and gas producers were mixed. BP (LSE: BP) shed a further 1.5% amid the oil spill accident in the Gulf of Mexico after an explosion at one of its oil rigs. Fellow supermajor Shell (LSE: RDSB) added nearly 2%, while BG group (LSE: BG) advanced 2.1%. Cairn Energy (LSE: CNE) posted a marginal gain, while Tullow Oil (LSE: TLW) lost 2.3%.

Amec (LSE: AMEC) lost nearly 1%, while another oil and gas engineering company Petrofac (LSE: PFC) made little headway.

Most midcaps gained. Melrose Resources (LSE: MRS) led the pack with a 2.7% advance. Premier Oil (LSE: PMO) added almost 2%. JKX Oil & Gas (LSE: JKX) added 1.3%, while Heritage Oil (LSE: HOIL) and Soco International (LSE: SIA) tacked on less than 1%.

Wood Group (LSE: WG) was flat, while fellow services company Wellstream Holdings (LSE: WSM) advanced 1.4%.

Junior companies didn’t show much movement. North America focused oil & gas junior Pantheon Resources (AIM: PANR) and North Sea explorers Xcite Energy (AIM: XEL) both climbed 5%.

Gold reaches $1,175 as weaker US dollar

Gold hit fresh 2010 highs today, eclipsing US$1,175/oz, spurred by a combination of safe haven buying and a weaker US dollar.

Gold and other precious metals have rallied as Greece’s debt situation deteriorated. Investors see gold as a hedge against currency risks associated with huge sovereign debts of the US, UK and euro zone member states. Until recently, gold usually moved in tandem with the euro and inversely to the US dollar. Now, gold comes in demand with instability in the currency markets as investors are seeing to put money into safer assets such as precious metals.

Europe’s single currency surged after Greece announced new austerity measures, weakening the US dollar and further boosting gold.

Gold reached US$1,176/oz, while silver and platinum advanced to US$18.65/oz and US$1,735/oz respectively.

Major mining stocks were mixed. Randgold Resources (LSE: RRS) climbed 1.1%, while platinum miner Lonmin (LSE: LMI) was flat and silver producer Fresnillo (LSE: FRES) posted a marginal loss.

Specialty chemicals firm Johnson Matthey (LSE: JMAT) was unmoved.

Aquarius Platinum (LSE: AQP) led the midcaps with a 1.5% advance. Silver producer Hochschild Mining (LSE: HOC) shed1% and Petropavlovsk (LSE: POG) posted a small loss.

South American based explorer Mariana Resources (AIM: MARL) and Africa focused gold deposit developer Cluff Gold (AIM: CLF) led the juniors, climbing 9% and 8.5% respectively. Turkey focused gold miner Ariana Resources (AIM: AAU) added 5%.

Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) headed in the opposite direction, slipping 8%.

Base metals rise, but miners tumble

Base metals rose today with copper and nickel reaching US$3.34/lb and US$11.71/lb, while zinc held steady at US$1.02/lb.

Mining stocks were in decline. Rio Tinto (LSE: RIO) shed 3.5% to slide to the bottom of the index, BHP Billiton (LSE: BLT) and Vedanta Resources (LSE: VED) lost nearly 3% and Eurasian Natural Resources (LSE: ENRC) shed 2.3%, as did Xstrata (LSE: XTA).

Antofagasta (LSE: ANTO) was down 1.9%, while Anglo American (LSE: AAL) and Kazakhmys (LSE: KAZ) lost slightly more than 1%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) outperformed the market, rising 2%.

Cement operator Prosperity Mineral Holdings (AIM: PMHL) led the small caps, climbing 8%. Zinc miner Connemara Mining (AIM: CON) and Finders Resources (AIM: FND) followed, tacking on 7%. Copper and nickel explorer Regency Mines (AIM: RGM) rose 5%.

Banks, insurance, private equity

Banking stocks were in decline with the sole exception of Standard Chartered (LSE: STAN), which posted a small gain. Barclays (LSE: BARC) was at the bottom of the pile with a 5.5% loss, while Royal Bank of Scotland (LSE: RBS) shed 2%, fellow part-nationalised bank Lloyds (LSE: LLOY) was down 1.5% and HSBC (LSE: HSBA) slid 1.2%.

Insurance companies were mixed. Legal & General (LSE: LGEN) and Prudential (LSE: PRU) added nearly 1%, while RSA Insurance Group (LSE: RSA) was flat and Admiral Group (LSE: ADM) and Standard Life (LSE: SL) posted marginal losses. Aviva (LSE: AV) and Old Mutual (LSE: OML) shed almost 1%.

Private equity group 3i (LSE: III) added 1.3%.

Small Cap News

Thor Mining (AIM, ASX: THR) has reported that the company and its wholly owned subsidiary, TM Gold Pty Ltd, have executed a formal agreement with private vendors for the staged acquisition of 3 tenements.

Gulfsands Petroleum (AIM: GPX) said it received a fresh, unsolicited, 315p per share approach from Oil India Ltd (BOM: 533106) and Indian Oil Corp (BOM: 530965), on the 27 April 2010. The company rebuffed the unchanged offer, and according to Gulfsands, the board remains unanimously of the view that the proposal is wholly inadequate and materially undervalues the company.

Cluff Gold (AIM: CLF, TSX: CFG) has confirmed that discussions, with regards to a possible offer for the company, are on-going. The company said it has now asked all interested parties to finalise offers or conclude discussions relating to the bidding process in the near future.

Mariana Resources (AIM: MARL) has begun Reverse Circulation (RC) drilling at the Perro Chico iron-oxide-copper-gold  (IOCG) project  in Northern Chile. The five-hole, 2,000 metre, RC drilling programme will test a number of IOCG targets generated from a recently completed ground magnetic survey, the 2009 gravity survey, and results from Mariana's previous drilling.

Marketing software specialist smartFOCUS (AIM: STF) has secured a contract from online sports nutrition company Myprotein.co.uk to deliver stronger email marketing campaigns, better understand key purchasing groups and customer behaviour, and improve marketing performance. Financial terms were not disclosed.

ZincOx (AIM: ZOX) said that on 29 April 2010, three of its directors bought a total of 140,000 shares. The company’s managing director Peter Wynter Bee purchased the bulk of the shares, taking 128,000 at 50.25p and subsequently increasing his beneficial holding to 490,000 shares, or a 0.629% stake.

African Eagle Resources (AIM: AFE) reported narrowing losses in the 2009 full-year with money raised for its core Dutwa nickel project in Tanzania, sales of non-core assets and continuing focus on nickel, which it noted was called one of the “hot” metals for the longer term.

KEFI Minerals (AIM: KEFI) is planning a future work program at the untested western half of the 800 metre long anomaly identified at the Bakir Tepe project in southwest Turkey, after the company told investors that the recently completed diamond drilling programme at Bakir Tepe did not intercept encouraging grades of mineralisation.

In a note to investors, Equity Development commented on Plant Impact’s (AIM: PIM) very good potato trial results reported earlier this week - the company’s CaT and PiNT technologies increased the number of potato’s grown by between 12.3% and 25.6%.

Westminster Group (AIM: WSG) informed investors that Newton Nominees purchased 700,000 shares – equating to 3.94% of the issued shares – on 26 April and a further 80,000 shares on 27 April.

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