Overview: the UK markets started the day with gains, however, the FTSE 100 was on course to close with another massive loss in late afternoon as fears over Europe’s debt crisis and the possible impact of Germany’s ban on naked short selling on the liquidity in bond markets persisted.The blue chip index was 110 points, or 2.1% below the opening level minuted before the end of trading.
All blue chips were in the red today with the sole exception of oil and gas supermajor Shell (LSE: RDSB), which was flat.
Miners once again emerged as the heaviest fallers in the FTSE 100. Rio Tinto (LSE: RIO), Kazakhmys (LSE: KAZ), Eurasian Natural resources (LSE: ENRC) and Xstrata (LSE: XTA) lost more than 6.5%. National Grid (LSE: NG), which today announced a £3.2 billion rights issue, was at the bottom of the pile with a 8% decline. Beverage group SABMiller (LSE: SAB) dropped 6.3%, while Home Retail Group (LSE: HOME), base metal miner Anglo American (LSE: AAL) and tour company TUI Travel (LSE: TT) retreated 5%.
US stocks tumbled in early trade. The Dow Jones Industrial Average plummeted 2.5%, while the broader S&P 500 index slid 2.7% and the technology heavy NASDAQ composite fell 3.1%.
Commodities
Oil prices declined today with July Brent Crude sliding to US$71.48/barrel and US light, sweet crude for July delivery dropped to US$70.62/barrel on the New York Mercantile Exchange (NYMEX).
Crude was hit by yet another freefall in global equity markets amid a fresh wave of jitters over Europe’s debt crisis coupled with the lingering impact from Germany’s decision to ban naked short selling of certain euro denominated financial assets and fears that other countries could follow.
The plummeting stocks offset the positive impact from this week’s inventories reports that unexpectedly showed stronger crude demand. The American Petroleum Institute (API) reported a surprising decline in US crude stockpiles of nearly 0.8 million barrels, while an increase was expected. A more closely watched report from Energy Information Administration (EIA) showed a smaller than expected increase of 200,000 barrels in US stockpiles. EIA also said that gasoline stocks shed 300,000 barrels and distillates, which include diesel and heating oil, were down by 1 million barrels. At the same time, oil stockpiles at Cushing, Oklahoma, which is the delivery point for benchmark West Texas Intermediate crude, rose to 38 million barrels with the overall capacity estimated at 41 million barrels.
In the wake of Germany’s ban and fears that Greece’s debt crisis could spread into other euro zone countries, the euro remain at four year lows against the US dollar. A stronger greenback makes dollar-denominated commodities such as crude more expensive for holders of other currencies to dent demand.
Blue chip oil and gas producers were in decline today with the exception of Shell (LSE: RDSB), which was flat. Fellow supermajor BP (LSE: BP) posted a small gain, while BG Group (LSE: BG) declined 1.9%, Cairn Energy (LSE: CNE) lost 2% and Tullow Oil (LSE: TLW) tumbled 3.4%.
Engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) lost 2.3% and 2.8% respectively.
Midcaps followed the trend. Heritage Oil (LSE: HOIL) shed nearly 5% to slide to the bottom of the pile. Premier Oil (LSE: PMO) and Salamander Energy (LSE: SMDR) lost about 4.5%. Dana Petroleum (LSE: DNX) and Soco International (LSE: SIA) shed a little over 3%. Melrose Resources (LSE: MRS) was down 3.7%.bDragon Oil (LSE: DGO) declined 2.2% and JKX Oil & Gas (LSE: JKX) did relatively well, posting only a small decline.
Service companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) slid 3.4% and 4.1% respectively.
Some junior companies managed to go against the tide and post gains. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA), which today farmed out a project in Texas, rallied 12% and 10.5% respectively. Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) also was in demand, rising 5.5%.
Ukraine focused gas producer, Regal Petroleum (AIM: RPT) and North Sea explorers Xcite Energy (AIM: XEL) headed in the opposite direction, slipping 6% and 5% respectively.
Gold drops to $1,190, silver and platinum decline
Gold rebounded from two week lows after a rally in stock markets was reversed, turning into yet another selloff to send the main indexes in Europe and the US south.
Gold is increasingly seen as a hedge against risks associated with currency and equity markets. The yellow metal used to serve as an investment alternative to the US dollar and usually moved inversely to the American currency and in tandem with the euro.
Gold prices were negatively impacted by weak demand from India, which is the world’s largest consumer of gold.
Gold returned to US$1,190/oz, while silver and platinum dropped to US$17.71/oz and US$1,517/oz respectively.
Major miners fell today. Randgold Resources (LSE: RRS) lost 1.7%, while fellow blue chips silver miner Fresnillo (LSE: FRES) and platinum producer Lonmin (LSE: LMI) both shed slightly more than 4%.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) was down 3.4%.
Aquarius Platinum (LSE: AQP) tumbled 11.3%. Silver producer Hochschild Mining (LSE: HOC) and gold miner Petropavlovsk (LSE: POG) dropped 4%.
Turkey focused gold miner Ariana Resources (AIM: AAU) went against the tide, rising 5%.
Africa focused gold deposit developer Cluff Gold (AIM: CLF) slipped into the red with a 9% loss. Western Australia operating Norseman Gold (AIM: NGL) and Philippines focused gold producer Medusa Mining (AIM&ASX: MML) declined 8%. Canada based junior gold developer Rambler Metals and Mining Plc (AIM: RMM), copper and gold miner EMED Mining (AIM: EMED) and London listed Australian gold producer Leyshon Resources (AIM: LRL) dropped 7%, 6.5% and 6% respectively.
Copper and nickel slide to weaken miners
Base metals were in decline. Copper and nickel dropped to US$2.93/lb and US$9.34/lb and zinc slid to US$0.81/lb.
Mining stocks were hit hard by lower metals. Xstrata (LSE: XTA) and Eurasian Natural resources (LSE: ENRC) were at the bottom of the pile with losses of 7.5%. Kazakhmys (LSE: KAZ) and Rio Tinto (LSE: RIO) shed more than 7%. Anglo American (LSE: AAL) and Vedanta Resources (LSE: VED) dropped 6%, BHP Billiton (LSE: BLT) was down 5% and Antofagasta (LSE: ANTO) retreated 4.2%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, shedding 6.8%.
Most small caps were in decline. Tunisia focused metal miner Maghreb Minerals (AIM: MMS) and laterite nickel specialist European Nickel (AIM: ENK) slipped 10% and 9% respectively, uranium and copper explorer Kalahari Minerals (AIM: KAH) and tantalum concentrate supplier with assets in Mozambique Noventa (AIM: NVTA) shed 8.5%, Indonesia operating coal miner Churchill Mining (AIM: CHL) was down 8% and Finders Resources (AIM: FIND) and zinc mining and recycling specialist ZincOX (AIM: ZOX) dropped 7.5%. Botswana operating nickel and copper miner Discovery Metals (AIM: DME) and London Mining (AIM: LOND) were down 7%.
Banks, insurance, private equity
Part-nationalised Lloyds (LSE: LLOY) was at the bottom of the banking sector with a 3.5% decline, while another bailed out bank RBS (LSE: RBS) lost 2.8%. Standard Chartered (LSE: STAN) dropped 3%, Barclays (LSE: BARC) slipped 1.9% and HSBC (LSE: HSBA) moved down 1.7%.
Insurance companies followed. Old Mutual (LSE: OML) led the retreated, slipping 4%. Aviva (LSE: AV) was down 2.3%, while Standard Life (LSE: SL) and Legal & General (LSE: LGEN) lost nearly 2%. Admiral Group (LSE: ADM) and Prudential (LSE: PRU) declined 1.4% and 1.2% respectively. RSA Insurance Group (LSE: RSA) lost nearly 1%.
Private equity group 3i (LSE: III) declined 1.8%.
Small Cap News
Xtract Energy (AIM: XTR) said it has appointed Peter Moir as an executive director with immediate effect. Moir is president and CEO of Elko Energy Inc, in which Xtract owns 50.01 percent.
Online and TV interactive gaming group NetPlay TV PLC (AIM: NPT) has issued an upbeat trading statement, saying it is expecting full-year results to be in line with market expectations. Trading results for the quarter ended 31 March 2010 are also positive and in line with market expectations.
Pan African Resources (AIM: PAF) said that an updated resource statement compiled for its wholly owned Phoenix Platinum project in South Africa showed an increase in total resource of 15.8% to 469,000 oz (ounces) of 4E PGM (platinum group metals platinum, palladium, rhodium and gold), while in-situ grade improved by 2.6% to 3.15 g/t (grammes per tonne) PGM 4E’s.
SeaEnergy PLC (AIM: SEA) is looking at increasing its stake in the Inch Cape offshore windfarm after RWE npower renewables notified the group’s 80 percent held unit SeaEnergy Renewables Ltd (SERL) and The Crown Estate (TCE) of its desire to exit the project.
London Mining (AIM: LOND) has upgraded the resource base at Marampa to 392 Mt (million tonnes) at 31% Fe (iron), marking an overall increase of 300%, while its Chinese business posted revenues of over US$3 million during the quarter to 31 March 2010.
Kyrgyzstan operating miner Chaarat Gold Holdings (AIM: CGH) has reported on the progress made in 2009, which saw a reduction of losses from US$11.36 million to US$7.4 million and an upgrade of the company’s JORC compliant resource to 4 Moz (million ounces) of gold, which it said contributed to the “positive sentiment around Chaarat” along with the strong gold prices and addition of a member of the China Nonferrous Metals Mining Corp to the shareholder register.
Renovo Group (AIM: RNVO) has reported on its interim results, saying that its pipeline progressed within guidance. Cash reserves on reporting of the first Juvista Phase 3 trial in H1 2011, which is currently the company’s main focus, will also be in line with expectations at £25-30 million.
Caza Oil & Gas (TSX:CAZ; AIM: CAZA) has executed an exploration agreement with Devon Energy Production Co to jointly test and develop Caza's Windham Wolfberry oil and gas prospect, following its strategy to limit single project exposure.
Mineral sands producer Kenmare Resources (LSE: KMR) said that production figures for April showed further growth with ilmenite production up 14% at 57,307 tonnes from the monthly average of 50,300 tonnes achieved in the first quarter, while zircon production rose 20% to 3,231 tonnes from 2,670 tonnes in Q1.