FTSE 100 climbs as oil, gold, silver and platinum rise
Overview: the FTSE 100 turned positive after US non-manufacturing data from the ISM (Institute of Supply Management) revealed a greater than expected expansion of the service sector as its non-manufacturing index climbed to 53 from 50.5, beating the projections that foresaw an increase to 51. The ADP National Employment Report sent mixed signals as while it revealed a decline of 20,000 in private sector employment, it also said that non-farm employment grew by 17,000 and employment among small and medium businesses rose for the first time in two years, adding 8,000.
Copper miner Kazakhmys (LSE: KAZ) and insurer Prudential (LSE: PRU) were atop the leaderboard with gains of nearly 5%. Anther insurer Legal & General (LSE: LGEN) and bank Standard Chartered (LSE: STAN) added 4.5%. Interdealer broker ICAP (LSE: IAP), Chilean copper miner Antofagasta (LSE: ANTO) and platinum producer Lonmin (LSE: LMI) rose 3.5%.
RSA Insurance Group (LSE: RSA), whose subsidiary is Chile’s largest insurer, was down 4% after taking a US$30 million hit in claims related to the Chilean earthquake. InterContinental Hotels Group (LSE: IHG), beverage group Diageo (LSE: DGE) and insurance focused investor Resolution (LSE: RSL) all lost 1.6%. Tour operators TUI Travel (LSE: TT) and Carnival Corp (LSE: CCL) lost slightly more than 1%, as did commercial property company Hammerson (LSE: HMSO), catered Compass Group (LSE: CPG) and plumbing and heating equipment manufacturer Wolseley (LSE: WOS).
US stocks opened higher on the ISM data. The Dow Jones Industrial Average and the broader S&P 500 index both gained 0.3% to start the day, while the technology heavy NASDAQ composite rose 0.2%.
Commodities
Crude futures eclipsed US$80/barrel today despite a greater than expected increase in US oil inventories of 2.7 million barrels, which was reported by the API (American Petroleum Institute) yesterday. Gasoline stocks also rose, adding 900,000 barrels, however, distillate inventories, which also include heating oil, fell by 4.1 million barrels, indicating stronger demand.
This week’s upward movement in global stock markets also improved the demand outlook to further boost crude prices.
April Brent Crude climbed to US$78.68/barrel, while US light, sweet crude advanced to US$80/25/barrel.
Investors are now looking to the closely watched US inventories data from the Energy Informaiton Administration (EIA), which is due out later today.
Major oil and gas producers were in decline with the sole exception of Tullow oil (LSE: TLW), which posted a gain of less than 1%. Cairn Energy (LSE: CNE) slid to the bottom of the pile with a 2.6% decline, while Shell (LSE: RDSB) lost nearly 1%. Fellow supermajor BP (LSE: BP) declined marginally, as did BG Group (LSE: BG).
Dragon Oil (LSE: DGO) led the sector in the FTSE 250 with a 3.3% advance, while Soco International (LSE: SIA) rose marginally.
Melrose Resources (LSE: MRS) and Premier Oil (LSE: PMO) headed in the opposite direction with losses of 2.7% and 1.9% respectively, while JKX Oil & Gas (LSE: JKX) posted a small decline.
Oil and gas engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) were flat.
Dana Petroleum (LSE: DNX), Heritage Oil (LSE: HOIL) and Salamander Energy (LSE: SMDR) were flat.
Wood Group (LSE: WG) added less than 1%, while fellow services company Wellstream Holdings (LSE: WSM) lost 1%.
Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) led the small caps, rallying 13%. Oil and gas company with assets in Iraq, Syria and Gulf of Mexico, Gulfsands Petroleum (AIM: GPX) and Irish oil and gas exploration company Petroceltic International (AIM: PCI) both added 4%.
EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) were in the red with losses of 5% and 4% respectively.
Gold approaches $1,140 as US dollar falls
Gold prices rose sharply for the second day in a row, climbing to US$1,139/oz as the US dollar stayed in decline against other major currencies and investors sought safe haven assets such as gold amid volatility in currency and stock markets.
The euro rose against the US dollar after Greece introduced another round of austerity measures including VAT (value added tax) hikes and expenditure reductions including cuts of civil servants’ bonuses to save some €4.8 billion. Europe's single currency has recently hit 10 month low against the greenback.
The European Union has previously urged Greece to implement more austerity measured to reduce its budget deficit by 3% to hit the EU’s target for 2010. The first austerity package caused mass protests around the debt laden country, which is also gearing up for a bond sale to raise another €20 billion to pay off its debts that are due in April and May. Pound sterling, the Canadian dollar and the Australian dollar, which was on the rise after the country’s central bank hiked a key interest rate to 4%, all gained against the American currency, driving up US dollar-denominated commodities such as gold.
The yellow metal is seen as an alternative investment and usually moves inversely to the US dollar.
The world’s largest gold backed exchange fund SPDR said its holdings increased by 4.5 tonnes to 1,111 tonnes after declining steadily since the beginning of the year.
Other precious metals also did well with silver climbing to US$17.15/oz and platinum rose to US$1,577/oz.
Major mining stocks were on the rise today. Platinum producer Lonmin (LSE: LMI) took the led with a 1.7% advance, while Randgold Resources (LSE: RRS) and Mexico City-based silver and gold miner Fresnillo (LSE: FRES) added nearly 1%.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) gained 1.5%.
Gold miner Petropavlovsk (LSE: POG) led the sector in the FTSE 250 with a 5.2% rally. Silver producer Hochschild Mining (LSE: HOC) and Aquarius Platinum (LSE: AQP) followed with gains of 1.5% and 1.8% respectively.
Most junior miners showed little movement. Philippines focused gold producer Medusa Mining (AIM&ASX: MML) was among the top performers with a 4% climb. Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) and Brazil focused gold miner Horizonte Minerals (AIM: HZM) were in decline, shedding 13% and 8.5% respectively.
Copper and nickel rally to lift miners
Base metals extended gains today with copper and nickel rising to US$3.41/lb and US$10.20/lb respectively, while zinc climbed to US$1.02/lb.
Kazakhmys (LSE: KAZ) led the mining stocks with a 4% climb. Antofagasta (LSE: ANTO) and Xstrata (LSE: XTA) added about 3%, while Anglo American (LSE: AAL) climbed 2.7%, Rio Tinto (LSE: RIO) advanced 1.2% and Eurasian Natural Resources (LSE: ENRC) tacked on nearly 1%, as did Vedanta Resources (LSE: VED).
The world's largest miner BHP Billiton (LSE: BLT) posted an insignificant gain.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) was in correction, shedding 1.2%.
Copper and nickel explorer Regency Mines (AIM: RGM) was one of the best performers in the sector, gaining 5.5%. Tunisia focused metal miner Maghreb Minerals (AIM: MMS) lost 6.7%.
Banks, insurers, private equity
Standard Chartered (LSE: STAN) led the banking sector with a gain of nearly 5%. Barclays (LSE: BARC) and Lloyds (LSE: LLOY) followed, adding more than 2.5%. Royal Bank of Scotland (LSE: RBS) was flat, while HSBC (LSE: HSBA) lost less than 1%.
RSA Insurance Group (LSE: RSA) was the only insurance stock to slip into the negative today, shedding 4% in the aftermath of the Chilean earthquake, which will cost the company, whose subsidiary is Chile’s largest insurer, about US$30 million.
Other insurance stocks were in demand today. Prudential (LSE: PRU) and Legal & General (LSE: LGEN) led the pack with gains of 4.5%. Aviva (LSE: AV), Standard Life (LSE: SL) and Admiral Group (LSE: ADM) added 2.4%, 1.3% and 1% respectively. Old Mutual (LSE: OML) rose marginally.
Private equity group 3i (LSE: III) posted a small gain.
Large and Mid Cap News
ITV (LSE: ITV) has broadly maintained earnings and reduced debt in the full-year to end-December 2009, despite a declining television advertising market, with the broadcaster’s group revenues falling 7% from a year earlier to £1.8bn. Cost-cutting enabled ITV to bank a £25m pretax profit, reflecting a return to profits following 2008's £2.7bn loss.
For the year ended 31 December 2009, Standard Chartered (LSE: STAN) reported pretax profits of US$5.1bn, up 13% compared to US$4.5bn the previous year. Earnings per share grew 2.8% during the period, to 179.8 cents. The Asia focused banking group recommended a final dividend of 44.80 cents per share, taking the annual dividend to 66.03 cents per share, a 7.2% increase from 2008.
In its preliminary results report for the year ended 27 December 2009, the Restaurant Group (LSE: RTN) increased revenue by 5% to £435m, while adjusted earnings increased 3% to £80m and adjusted pre-tax profit was £50m, up 2% from £48.9m in 2008.
In February 2010, British Airways’ (LSE: BAY) passenger air-traffic and capacity improved on a year-on-year basis. Passenger traffic numbers improved by 1.1% in Revenue Passenger Kilometres, and Available Seat Kilometres were reduced by 1.9%. The comparative passenger load factor increased by 2.2 percentage points compared to last year, to 74.2%.
Small Cap News
Lonrho (AIM: LONR) said its African businesses are delivering real growth and strong tangible businesses in Africa as it reported that during the twelve months ended 30 September 2009, it increased turnover by 266% on a like-for-like basis. Reported revenue rose 111% to £90.9m and net asset value also rose, increasing by 16% to £81.1m. Consequently Lonrho significantly narrowed its losses to £4.5m compared with £38.7m in the previous year.
Griffin Mining (AIM: GFM) announced the latest JORC Mineral Resource for Zone III at its Caijiaying mine in the People's Republic of China. The new JORC-compliant statement identifies extensive resources and a long mine life for the company’s continuing mining operations and adds 4.7m tonnes at 6.7% zinc, 0.9 grams per tonne (gpt) gold, 34.3gpt silver and 0.4% lead to the Measured Resource category.
EMED Mining (AIM: EMED) has further advanced its Biely Vrch gold project in Slovakia towards production. It has commissioned a refinement of the scoping study to adjust the siting of infrastructure, and improve the project economics by adjusting the slopes of the planned open pit. The study is also to evaluate the potential for additional revenues from selling waste rock mined from the open pit for use in building roads.
IP commercialisation company Amphion Innovations (AIM: AMP) said its partner company Axcess International has launched wireless business credential product Dot Wireless Credential, which encompasses location identification, sensing and control capabilities.
Selwyn Resources (TSX-V: SWN) has extended the exclusivity period under the proposed joint venture with Yunnan Chihong Zinc & Germanium Co (Chihong), as the respective parties finalize their negotiations and seek shareholder approval. The transaction, which sees Chihong invest C$100m into the Canadian project and gain a 50% interest, is still on track to close in May 2010.
Brainspark (AIM: BSP) has agreed to subscribe for 25 million new ordinary shares in Daniel Stewart (AIM: DAN) for a total of £0.5 million, giving it a 6.66% stake in the company, while also acquiring an option - exercisable at Brainspark's discretion - to purchase a further 75 million shares by 29 June 2010.
Hydrogen (AIM: HYDG) reported a decline in full year revenues and profits, though the group still called it a good performance amid challenging market conditions and highlighted its cost cutting moves and return to profits in the second half.
Ocean Power Technologies (AIM: OPT, NASDAQ: OPTT) has been awarded €2.2m under the European Commission's Seventh Framework Programme (FP7). The grant is part of a total €4.5m which was awarded to a consortium, including OPT, to deliver a PowerBuoy wave energy device, as part of the WavePort project.
NEOVIA Financial (LSE: NEO) has agreed a significant deal with SeeSaw, the newly launched online TV service in the UK. NEOVIA’s NETBANX international payment gateway will process all payments made on SeeSaw.com once the website’s pay-TV service is launched later this year.
