Overview: markets plunged yet again today with the UK’s FTSE 100 trimming losses to 0.65% after shedding 2% earlier to slip below 5,000 for the first time since November 2009. The selloff came amid renewed fears over Europe’s debt situation and investor concerns over the strength of the ongoing economic recovery, causing even the safe haven assets to fall.
Miners Xstrata (LSE: XTA), Fresnillo (LSE: FRES) and Vedanta Resources (LSE: VED) led the blue chips with gains of 5% and 3.3% respectively. Vedanta Resources (LSE: VED), Antofagasta (LSE: ANTO) and Eurasian Natural Resources (LSE: ENRC) added more than 2.5%. Rio Tinto (LSE: RIO) climbed 2.5%.
Oil and gas supermajor BP (LSE: BP) was at the bottom of the pile with a 4% loss. Medical devices manufacturer Smith & Nephew (LSE: SN), beverage group SABMiller (LSE: SAB) and pharmaceutical company Shire (LSE: SHP) followed, dropping 3.7%, 3.3% and 3.2% respectively. Commercial property company British Land (LSE: BLND) lost 2.5%, as did hedge fund manager Man Group (LSE: EMG).
US stocks swiftly recovered from early falls. The Dow Jones Industrial Average turned a loss of about 0.5% into a 0.1% gain, while the broader S&P 500 index climbed 0.4% and the technology heavy NASDAQ composite advanced 0.35% after shedding more than 4% yesterday.
Commodities
Oil slips as markets fall
Oil prices declined today as equity markets continued plummeting to raise concerns about the strength of the ongoing economic recovery and crude demand. Investors are worried that the debt crisis that has caused Greece to request a multi-billion aid package from the EU and the International Monetary Fund (IMF) and implement a series of economic austerity measures to cause public unrest could spread into other euro zone states, most notable Spain and Portugal, which have recently been downgraded by leading rating agencies along with Greece.
Adding pressure on the stocks and the banking sector was news from Germany, which banned naked short selling of certain euro denominated financial instruments, and the US, which passed a large scale financial regulatory reform.
The negative trends in the markets have offset the impact from this week’s inventories reports, which surprisingly indicated growing oil demand in the US following months of declines.
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.
July Brent Crude declined to US$71.02/barrel, while US light, sweet crude for July delivery slipped below US$70/barrel, settling at US$69.55/barrel on the New York Mercantile Exchange (NYMEX).
Blue chip oil and gas producers were in decline today. BP (LSE: BP) lost 4%, while fellow supermajor Shell (LSE: RDSB) shed 2%, as did BG Group (LSE: BG) and Tullow Oil (LSE: TLW). Another FTSE 100 constituent Cairn Energy (LSE: CNE) lost 1.7%.
Engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) followed with each sliding 1.5%.
Midcaps fell with the exception of JKX Oil & Gas LSE: JKX), which posted a small gain and Melrose Resources (LSE: MRS), which was flat.
Premier Oil (LSE: PMO), Salamander Energy (LSE: SMDR) and Heritage Oil (LSE: HOIL) were at the bottom of the pile with losses of 4%. Dana Petroleum (LSE: DNX) declined 1.5%, while Dragon Oil (LSE: DGO) and Soco International (LSE: SIA) lost 1.2% and 1% respectively.
Services companies heade din different directions as while Wood Group (LSE: WG) declined 1.8%, Wellstream Holdings (LSE: WSM) posted a small gain.
Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) was one of the top performing juniors with a 7% gain. Iraq operating Irish oil company Petrel Resources (AIM: PET) slipped 7%.
Gold, silver and platinum drop
Gold extended losses today despite a continued selloff in the markets, which has recently boosted safe haven assets such as precious metals.
Gold has been increasingly seen as a safe haven asset by investors and posted fresh record highs at nearly US$1,250/oz a couple of weeks ago amid sharp falls in European and US markets. Now, however, investors seem to be dumping precious metals along with other assets.
Gold slid to US$1,174/oz today, while silver and platinum retreated to US$17.53/oz and US$1,495/oz respectively.
Major mining stocks were mixed. Randgold Resources (LSE: RRS) lost 1.9%, while platinum miner Lonmin (LSE: LMI) and silver producer Fresnillo (LSE: FRES) lost 1% and 2% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) posted a small loss.
In the FTSE 250, silver miner Hochschild Mining (LSE: HOC) declined 1.8%, gold producer Petropavlovsk (LSE: POG) posted a marginal loss and Aquarius Platinum (LSE: AQP) went against the tide, advancing 3.5%.
Most small caps followed the trend. Uzbekistan focused gold miner Oxus Gold (AIM: OXS) slipped 8.5%, while Russia operating Ovoca Gold (AIM: OVG) lost 7.5% and Africa operating gold miner GMA Resources (AIM: GMA) retreated 6%, as did South American based explorer Mariana Resources (AIM: MARL).
Copper and nickel rise to support miners
Base metals improved today. Copper and nickel reached US$3.06/lb and US$9.59/lb, while zinc rose to US$0.84/lb.
Major base metal miners were on the rise. Xstrata (LSE: XTA) was in the lead with a 3.3% gain, while Antofagasta (LSE: ANTO), Eurasian Natural Resources (LSE: ENRC) and Vedanta Resources (LSE: VED) followed, advancing 1.3%. BHP Billiton (LSE: BLT) and Rio Tinto (LSE: RIO) climbed 1%. Anglo American (LSE: AAL) posted a small gain and Kazakhmys (LSE: KAZ) was flat.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) declined 2.8%.
Botswana operating nickel and copper miner Discovery Metals (AIM: DME) and uranium and copper explorer Kalahari Minerals (AIM: KAH), which today reported high grade assay results from its Rossing South uranium project, went against the tide, climbing 5% and 4.5% respectively.
Iron ore focused investor Red Rock Resources (AIM: RRR) moved with the sector, slipping 8%. Finders Resources (AIM: FIND), Philippines operating nickel miner Rusina Mining (ASX: RML; AIM: RMLA) and zinc mining and recycling specialist ZincOX (AIM: ZOX) retreated 5%.
Banks, insurance, private equity
Most financial stocks were in decline today. Part-nationalised Royal Bank of Scotland (LSE: RBS) and Lloyds (LSE: LLOY) lost 1.6%, as did HSBC (LSE: HSBA), while Standard Chartered (LSE: STAN) lost 1.7%. Barclays (LSE: BARC) went against the tide, climbing 1.2%.
Insurance companies followed the trend with the exception of Admiral Group (LSE: ADM) and RSA Insurance Group (LSE: RSA), which were unmoved.
Aviva (LSE: AV) posted a small loss, while Prudential (LSE: PRU) declined 1.3%, Legal & General Group (LSE: LGEN) lost 1.6%, Standard Life (LSE: SL) retreated 1.8% and Old Mutual (LSE: OML) shed 2.2%.
Private equity group 3i (LSE: III) posted a marginal gain.
Small Cap Movers
Other notable movers among the small caps included Africa focused investor Lonrho (AIM: LONR), which added 6%.
Large and Mid Cap News
Close Brothers Group PLC (LSE: CBG) said it remains confident of delivering a solid overall result for the 2010 financial year, give the good performance for the financial year to date.
London Stock Exchange Group (LSE: LSE) today reported on its final results for the year to 31 March 2010, reporting a 6% slide in revenue to £605.6 million due to stronger competition from rival trading platforms.
LSE said that performance in Italian cash equities and fixed income trading, Post Trade and Information & Technology divisions was good.
Small Cap News
Range Resources (ASX: RRS; AIM: RRL) has reported the Russell Bevly well has reached a depth of 6,425 feet.
S & U PLC (AIM: SUS) said it is cautiously optimistic about the outlook and is trading in line with its expectations for the year to date. Its financial position remains strong and borrowings should be reduced further in the second quarter.
Aukett Fitzroy Robinson Group PLC (AIM: AUK), the international practice of architects and interior design specialists, is pleased to announce that it has been awarded a contract to refurbish a large commercial building in Central London for Land Securities (LSE: LAND). The overall project construction value is approximately £45 million.
Argentina focused gold explorer Patagonia Gold (AIM: PGD) reported on its progress and financial performance in 2009 today, reiterating its operational timetable for 2010. Financings during the year to end-December and post-period will enable the company to achieve its goal to become a gold producer initially on a modest scale and to develop larger low production cost gold projects.
Uranium and copper explorer Kalahari Minerals (AIM: KAH) said Extract Resources (TSX, ASX: EXT) reported further exceptional assay results from the Rossing South uranium deposit at Extract's world-class Husab uranium project in Namibia, which “underlined its enormous potential,” with infill drilling returning grades of 2,243 ppm (parts per million) uranium over 73 metres.
Edison Investment Research has initiated coverage of Ariana Resources (AIM: AAU), saying the Turkey focused gold miner was well placed to minimize expenditure and explore its portfolio of licenses, which were acquired in the same geological province as Eldorado Gold’s (TSX:ELD, NYSE:EGO, ASX:EAU) 10 Moz (million ounce) Kisladag mine.
Leisure & Gaming PLC (AIM: LNG) has requested its shares to be suspended on AIM due to uncertainty over its financial position. It is currently in early stage discussions with a number of parties with a view to securing further funding for the business and it is undertaking a strategic review which may lead to a disposal of certain businesses and assets in its portfolio.
Platinum Australia Ltd (ASX, AIM: PLAA) said admission of its ordinary shares to trading on the AIM market of the London Stock Exchange will be cancelled with effect from July 2 2010, and the last trading day on AIM will be July 1 2010.