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FTSE 100 adds 0.4% as Dow Jones, S&P 500 and NASDAQ composite rFTSE 100 adds 0.4% as Dow Jones, S&P 500 and NASDAQ composite rise in early tradeise in early trade

10th Mar 2010, 4:15 pm FTSE 100 adds 0.4% as Dow Jones, S&P 500 and NASDAQ composite rFTSE 100 adds 0.4% as Dow Jones, S&P 500 and NASDAQ composite rise in early tradeise in early trade

Overview: the FTSE 100 defined pre-trade projections and climbed 0.4%, while a small loss was expected. The gains were despite an unexpected decline of 0.9% in UK manufacturing output in January, which was reported this morning.

Oil and gas engineering firm Petrofac (LSE: PFC) emerged atop the leaderboard with a gain of nearly 5% after RBS upgraded the stock from “hold” to “buy.” Interdealer broker ICAP (LSE: IAP) and Royal Bank of Scotland (LSE: RBS) followed, advancing 4%. Lloyds (LSE: LLOY) and silver miner Frensillo (LSE: FRES) added slightly more than 3%. Other notable risers included airline British Airways (LSE: BAY) and London Stock Exchange Group (LSE: LSE), which both climbed 2.5%.

British American Tobacco (LSE: BATS) slid to the bottom of the index with a 3.3% loss. Asset management firm Schroders (LSE: SDR) was down 3%, while tour operator TUI Travel (LSE: TT) and car insurer Admiral Group (LSE: ADM) declined 2% and 1.5% respectively. Telecom group BT (LSE: BT.A) was down 1%.

US markets were in buying mode this morning. The Dow Jones Industrial Average added 0.2%, the broader S&P 500 index climbed 0.5% and the technology heavy NASDAQ composite advanced 0.8%.

Commodities

Oil inched lower today, pressured by yesterday’s bearish inventories data from API (American petroleum Institute) and a stronger US dollar.

API said crude stockpiles in the US added 6.5 million barrels, while a smaller increase was expected. The data also signalled a sixth straight week of expansion in oil inventories. Gasoline inventories and distillates, which include heating oil, declined by 3.2 million barrels and 2.8 million barrels respectively. More closely watched inventories data from EIA (Energy Information Administration) is set to be released tomorrow.

OPEC (Organization of Petroleum Exporting Countries) has upped its demand forecast for the current year, projecting the global consumption to grow by an additional 0.9 mmbbls/d (million barrels per day) to 85.24 mmbbls/d provided that the ongoing economic recovery firms. Demand for the oil produced by OPEC, which currently accounts for 35% of the total, is expected to reach 29 mmbbls/d, topping the previous forecast by 0.2 mmbbls/d.

April Brent Crude dropped to US$79.88/barrel, while US light, sweet crude declined to US$81.37/barrel, still showing slight improvement from the morning’s levels.

Blue chip oil and gas producers didn’t show much movement. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) rose marginally, as did BG Group (LSE: BG) and Cairn Energy (LSE: CNE). Another FTSE 100 constituent Tullow Oil (LSE: TLW) declined marginally.

Amec (LSE: AMEC) was flat, while fellow oil and gas engineering firm Petrofac (LSE: PFC) advanced 4%.

JKX Oil & Gas (LSE: JKX) led the midcaps with a 2% gain, while peers Dragon Oil (LSE: DGO) and Heritage Oil (LSE: HOIL) added 1% and Dana Petroleum (LSE: DNX) and Salamander Energy (LSE: SMDR) posted gains of less than 1%.

Melrose Resources (LSE: MRS), Premier Oil (LSE: PMO) and Soco International (LSE: SIA) were flat.

Wood Group (LSE: WG) made little headway, while fellow services company Wellstream Holdings (LSE: WSM) tacked on 1%.

Iraq and Algeria operating junior Gulf Keystone Petroleum (AIM: GKP) slipped 9% after increasing its interests in Kurdistan by assuming 100% control of its GKPI operating subsidiary, following a material default by the company’s investment partner in Kurdistan, ETAMIC.

Europe focused oil and gas developer Ascent Resources (AIM: AST) added 5% after updating the market on its operations at the Peneszlek are of the Nyrsieg exploration permit in Hungary.

Gold finds support above $1,120 as euro recovers

Gold has been volatile today, mirroring movements in the currency markets, where the euro strengthened against the US to support gold above the US$1,120/oz mark. Europe’s single currency fell sharply against the greenback earlier in the day, weighed down by concerns over Greece’s debt problems after Prime Minister George Papandreou asked US President Barack Obama to help the country prevent the situation from worsening by cracking down on hedge funds and currency traders which he said contributed to the ongoing crisis.

Rating agency Fitch added to the jitters by threatening to downgrade another debt laden euro zone country Portugal from its current AA rating if its fiscal consolidation progresses too slow and proves insufficient.

The euro surged later in the day after Portugal conducted a successful bond issue to raise US$1.34 billion after introducing an economic austerity plan earlier this week. The issue was oversubscribed, just like in the case with Greece, which sold €5 billion worth of bonds last week.

The yellow metal is seen as a riskier investment alternative to the US dollar and usually moves inversely to the American currency.

Gold was negatively impacted by yesterday’s news from China, where Director of the country’s State Administration of Foreign Exchange Yi Gang said its investment in gold will now be limited due its inconsistency over the past 30 years that has reduced its appeal as a long-term investment.

China, which is the world’s largest producer and the second bigger consumer of gold behind only India, currently has US$2.4 trillion in foreign exchange reserves, including holdings of 1,054 tonnes of gold compared to holdings of 600 tonnes in 2003.

Gold stood at US$1,122/oz in late afternoon, while silver advanced to US$17.38/oz.

Platinum rallied, adding $10 to reach US$1,601/oz on demand from exchange traded funds.

Blue chip miners were in demand today. Platinum producer Lonmin (LSE: LMI) gained 2.5% to take the lead. Gold miner Randgold Resources (LSE: RRS) and silver and gold miner Fresnillo (LSE: FRES) followed, climbing 2.3%.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) added 1.1%.

Midcaps followed the trend with the exception of silver producer Hochschild Mining (LSE: HOC), which was flat. Aquarius Platinum (LSE: AQP) posted a small gain, while gold miner Petropavlovsk (LSE: POG) added 2.8%.

Commodity asset development company Mercator Gold (AIM: MCR) led the juniors with a 26% rally.

Western Australia operating Norseman Gold (AIM: NGL), which revised its production guidance downwards today, and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) declined 12.5% and 7.5% respectively. Africa operating gold and platinum miner Goldplat (AIM: GDP) and Brazil focused gold miner Horizonte Minerals (AIM: HZM) both lost 4.5%.

Miners advance as copper and zinc gain

Base metals were mixed as while copper and zinc inched higher to US$3.39/lb and US$1.07/lb, while nickel fell to US$9.83/lb.

All major mining stocks climbed today. Vedanta Resources (LSE: VED) and Xstrata (LSE: XTA) were in the lead with gains of over 2%. Anglo American (LSE: AAL), Antofagasta (LSE: ANTO), Rio Tinto (LSE: RIO) and Eurasian Natural Resources (LSE: ENRC) tacked on nearly 2%. Kazakhmys (LSE: KAZ) added 1.5% and BHP Billiton (LSE: BLT) rose 1%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) added anther 1.1% to reach 300 pence.

Iron ore focused investor Red Rock Resources (AIM: RRR) led the juniors with an 8.5% rally. Nickel and iron ore exploration junior Landore Resources (AIM: LND) slipped 7.5%.

Banks, insurance, private equity

Part-nationalised Royal Bank of Scotland (LSE: RBS) and Lloyds (LSE: LLOY) led the banking sector with gains of 4% and 3.5% respectively. Barclays (LSE: BARC) added 1.3%, while HSBC (LSE: HSBA) and Standard Chartered (LSE: STAN) tacked on less than 1%.

Insurers were mixed. Standard Life (LSE: SL) and Legal & General (LSE: LGEN) led with gains of 2.2% and 1.8% respectively. Prudential (LSE: PRU) and Aviva (LSE: AV) added less than 1%, while RSA Insurance Group (LSE: RSA) posted a small loss and Admiral Group (LSE: ADM) declined 1.4%.

Private equity group 3i (LSE: III) rose 1.1%.

Small Cap News

Xcite Energy (AIM: XEL) has announced the terms of its equity-based fundraising announced on 8 February. The company will issue shares at £0.40 per share to investors in the UK and at C$0.62 per share to North American investors. Xcite expects to raise aggregate gross proceeds of approximately £24.9 million (C$38.4 million). The proceeds will be used in the development of the Bentley oilfield in the North Sea.

StatPro Group PLC (AIM: SOG) said it has performed extremely well in its financial full year, with a marked improvement in all key financial performance indicators. For the 12 months ended 31 December 2009, the company reported a 48% increase in adjusted pretax profits to £6.9m, adjusted earnings (EBITDA) grew by 28% to £8.63m and earnings per share (EPS) increased by 29% to 9p. Revenue rose 13% year-on-year to £31.56m.

Cinpart PLC (AIM: CINP) said it appointed Professor Michael Hughes to the board as a non-executive director with immediate effect.

Allocate Software (AIM: ALL) said it has advanced against all strategic objectives during the third quarter, highlighting its expansion into Australia and New Zealand and stronger presence in the Nordic region following the acquisition of Time Care AB.

Ascent Resources (AIM: AST) has tested and completed the PEN-101 well in the Peneszlek area of the Nyrsieg exploration permits in eastern Hungary, which will commence production to sales immediately following the departure of the rig during the week of 15 March.

Sunkar Resources (AIM:SKR), a Kazakhstan focused mining company developing the Chilisai Phosphate project, confirmed this morning that it had met its minimum requirement to produce 1 million tonnes of phosphate in 2009.

Norseman Gold (AIM, ASX: NGL) has revised its production guidance for the current year down to 65,000 from the previous targets of 75,000 to 80,000 oz as production from the  Bullen Decline continued to disappoint, though the production forecast for the next financial year was left unchanged at between 105,000 and 110,000 oz (ounces).

In an analyst note on Solomon Gold (AIM: SOLG), London-based stockbroker Fairfax said it is looking forward to steady news flow throughout the next six to twelve months, following the company’s reorganisation and refocusing.  The broker anticipates further growth through the realisation of the value created by the changes of the last year.

Finders Resources (AIM, ASX: FND) has received official approval to change its financial year-end from 30 June to 31 December to align the balance dates of companies in the group, which will be effective from 31 December 2009 with the first financial report for the six months ended 2009 set to be released on 16 March.

Gulf Keystone Petroleum (AIM: GKP) is set to increase its interests in Kurdistan by assuming 100% control of its GKPI operating subsidiary, following a material default by the company’s investment partner in Kurdistan, ETAMIC. Subject to total expenditure of US$52m the company will increase its net interests in each of the four Kurdistan based oilfields - Shaikan, Sheikh Adi, Ber Bahr and Akri Bijeel.

Thor Mining (AIM, ASX: THR) said its half yearly pretax losses amounted to £534,000, which was about in line with a £500,000 loss in H1 2008 as the company reduced administrative expenses by more than 60% in response to lower molybdenum and tungsten prices.

In its first-half results statement, Discovery Metals Limited (ASX: DML, AIM: DME) said it has made significant progress and is on the cusp of moving from being an exploration company to becoming a mine development company. In the six months ended 31 December, it continued to focus its activities on the Boseto copper project in north-west Botswana. During the period, Discovery also signed a joint exploration agreement with the Japanese government agency, JOGMEC, to develop its Dikoloti nickel project in eastern Botswana.

In response to StatPro’s (AIM: SOG) strong full-year sresults, in which the software company reported a 48% increase in pre-tax profit, a number of analysts have upgraded their guidance for the current financial year. Both Edison Investment Research and Cenkos Securities provided a marginal upgrade for the FY2010, before considering the potential upside provided by the two new SaaS (Software as a Service) products StatPro Seven and StatPro Revolution.

Shares in Tanfield Group PLC (AIM: TAN) soared in morning trade after the engineering group announced it received a non-binding, conditional offer from Smith Electric Vehicles US Inc (SEVUS) for the company's Smith Electric Vehicle division.

Coloured gemstone producer Gemfields (AIM: GEM) reported revenues of US$12 million for the six months ended 31 December 2009 compared to just US$0.34 million in H1 2008 after two successful emerald auctions in July and November 2009 that raised the company US$11.5 million.

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