Kazakhmys, Fresnillo and Randgold Resources push FTSE 100 lower
Overview: the FTSE 100 turned negative today, shedding 0.6% to wipe out yesterday’s gains, which was in line with pre-trade projections. Miners and energy stocks were weak as oil and metal prices edged lower on Chinese demand concerns and a stronger US dollar.
Oil and gas engineering firm Petrofac (LSE: PFC) emerged atop the leaderboard with a gain of nearly 4%. Telecom BT (LSE: BT.A) followed, climbing 3%. Tour operator Thomas Cook (LSE: TCG) and retailer Kingfisher (LSE: KGF) gained slightly more than 2.5%, while temporary power provider Aggreko (LSE: AGK) advanced 2%.
Quality and safety services provider Intertek (LSE: ITRK), another tour company TUI Travel (LSE: TT) and clothing retailer Next (LSE: NXT) were up 1.8%.
Copper miner Kazakhmys (LSE: KAZ) was the heaviest faller with a 3.5% loss. Sector peers Fresnillo (LSE: FRES), Rio Tinto (LSE: RIO) and Randgold Resources (LSE: RRS) declined 3%, as did medical devices manufacturer Smith & Nephew (LSE: SN).
US stocks were slight lower in early trade as a weekly jobless claims update from the Labor Department showed a lesser than expected decline of 6,000 to 462,000. The Dow Jones Industrial Average declined 0.2%, while the broader S&P 500 index was down 0.15% and the technology heavy NASDAQ composite was flat.
Commodities
Crude prices recouped their early losses in mid afternoon today, supported by an inventories update from the US Energy Information Administration (EIA), which reported a surprisingly low increase of 1.4 mmbbls (million barrels) in oil inventories a day after API (American Petroleum Institute) 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.
At the same time, EIA said that gasoline stockpiles and distillates, which include heating oil, were down fell 2.9 million barrels and 2.2 million barrels respectively to signal higher demand.
Meanwhile, OPEC (Organization of Petroleum Exporting Countries) upped its demand forecast for the current year yesterday, 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.
April Brent Crude recaptured the US$80/barrel mark, while US light, sweet crude was at US$81.74/barrel.
Blue chip oil and gas producers were mixed. Cairn Energy (LSE: CNE) led the pack with a 1% gain. Shell (LSE: RDSB) was flat, while fellow supermajor BP (LSE: BP) rose marginally. BG Group (LSE: BG) and Tullow Oil (LSE: TLW) lost nearly 1%.
Oil and gas engineering firms did well as Petrofac (LSE: PFC) added 3%, while peer Amec (LSE: AMEC) tacked on less than 1%.
Premier Oil (LSE: PMO) was the top performer among the midcaps, climbing 2% after reporting an oil discovery in the North Sea. Salamander Energy (LSE: SMDR) and Soco International (LSE: SIA) also did well with gains of 1.3%.
Dana Petroleum (LSE: DNX) was flat, while Heritage Oil (LSE: HOIL) rose marginally and Dragon Oil (LSE: DGO), JKX Oil & Gas (LSE: JKX) and Melrose Resources (LSE: MRS) slipped 1.5%, 2% and 3% respectively.
Wood Group (LSE: WG) rose marginally, while fellow services company Wellstream Holdings (LSE: WSM) added 2.7%.
Energy investor Xtract Energy PLC (AIM: XTR) and EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) led the juniors, advancing 9% and 5% respectively.
Gold falls to $1,105 as US dollar firms
Gold fell sharply today as the US dollar gained against other major currencies on fears of further tightening of monetary policy in China after the country’s consumer price index increased to an annualised rate of 2.7% in February to signal higher inflation, which, however, was still within the government’s 3% target for 2010. Back in January, China moved to implement a series of measures to curb credit growth after it reached record levels in the first weeks of the year, pushing lending down to 700 billion yuan in February compared to 1.39 trillion yuan in the previous month.
The American currency is seen as a safe haven asset, while gold is considered to be a riskier alternative and usually moves inversely to the US dollar.
The euro performed well last week after debt laden Greece introduced a new round of economic austerity measures and conducted a successful €5 billion bond issue to meet its near term commitments to ease concerns over its ability to avoid a default. This week, however, Europe’s single currency fell under pressure after Fitch threatened to cut Portugal’s rating from the current AA if the ongoing fiscal consolidation continues at a slow pace and proves insufficient. The euro edged higher later in the week after Portugal raised US$1.35 billion via a bond issue to prop up precious metals, though it fell back today ahead of the Swiss National Bank’s interest rate decision, which will be released at 13:30 GMT.
Gold stabilised at about US$1,105/oz, climbing on technical buying, which intensified once the yellow metal moved closer to the psychological level of US$1,100/oz.
Silver and platinum followed, dropped to US$16.92/oz and US$1,581/oz respectively.
Most major mining stocks were in decline today. Silver producer Frensillo (LSE: FRES) led the retreat with a 2.6% loss. Randgold Resources (LSE: RRS) and platinum producer Lonmin (LSE: LMI) declined 2.2% and 1.7% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) was flat.
Midcap gold miner Petropavlovsk (LSE: POG) posted a small gain to defy the trend, however, fellow FTSE 250 constituents Aquarius Platinum (LSE: AQP) and silver producer Hochschild Mining (LSE: HOC) slipped 2.8% and 2.6% respectively.
Africa operating gold and platinum miner Goldplat (AIM: GDP), Uzbekistan focused gold miner Oxus Gold (AIM: OXS) and Brazil focused gold miner Horizonte Minerals (AIM: HZM) climbed 10%, 7% and 6% respectively.
Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) and Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) headed in the opposite direction, slipping 6% and 3.5% respectively.
Copper and nickel slide to weaken miners
Base metals followed as copper and nickel slid to US$3.33/lb and US$9.59/lb respectively, while zinc dropped to US$1.03/lb.
Base metals turned negative with the exception of Chilean copper miner Antofagasta (LSE: ANTO), which posted a small gain.
Kazakhmys (LSE: KAZ) led the retreat, shedding 3%. Rio Tinto (LSE: RIO) followed with a 2.6% loss, while Xstrata (LSE: XTA) and BHP Billiton (LSE: BLT) lost 2.3% and Eurasian Natural Resources (LSE: ENRC) was down 2%, as was Vedanta Resources (LSE: VED).
Anglo American (LSE: AAL) slid 1.7%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, shedding 1.5%.
Australia focused coking coal producer Caledon Resources (AIM: CDN) was one of the top performers among the juniors with a 4.5% gain.
Bank, insurance, private equity
Banking stocks were in decline today with the sole exception of Lloyds (LSE: LLOY), which gained 1.3%. Barclays (LSE: BARC) lost 1.9%, while HSBC (LSE: HSBA) and Standard Chartered (LSE: STAN) slid 1.4% and 1.1% respectively.
Royal Bank of Scotland (LSE: RBS) declined marginally.
Insurance stocks were mixed. Old Mutual (LSE: OML) was at the bottom of the pile with a loss of 2.6%. Legal & General (LSE: LGEN) declined marginally, while Aviva (LSE: AV) was flat and Admiral Group (LSE: ADM), Prudential (LSE: PRU) and RSA Insurance Group (LSE: RSA) added less than 1%.
Standard Life (LSE: SL) was in the lead, climbing 1.9%.
Private equity group 3i (LSE: III) posted a small gain.
Small Cap Movers
Other notable movers among the small caps included developer of CAD and image analysis software Medicsight (AIM: MDST) and Zimbabwe focused investor LonZim (AIM: LZM), which declined 13% and 5% respectively. Mobile email and data synchronisation group Synchronica (AIM: SYNC) rallied 16%.
Large and Mid Cap News
BP (LSE: BP) said it is paying Devon Energy Corp (NYSE: DVN) US$7.0 billion in cash for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico, giving the UK oil major a material exploration position in the deepwater offshore Brazil and significantly enhance its position in core strategic areas.
AstraZeneca (LSE: AZN) has agreed a license and supply deal with India's Torrent Pharmaceuticals, whereby Torrent will supply a portfolio of generic medicines to AstraZeneca. The generic medicines are already licensed in a range of countries, and the partnership intends to brand and market them in many where AstraZeneca already has a strong commercial footprint.
Supermarket chain Morrisons (LSE: MRW) said in its results statement for the year ended 31 January 2010 that it added a further 43 new stores in the period, increased turnover by 6% to £15.4bn and reported underlying profits by 21% to £767m from the previous year.
In it full-year results statement, Computacenter (LSE: CCC) said it made good progress in 2009 and it has entered 2010 with a lower cost base, having secured large services contracts. For the twelve months ended 31st December2009, the company reported a 25.8% increase adjusted pre-tax profit to £54.2m compared with £43.1m in the previous year, earnings per share (EPS) increased 31.9% to 27.7p.
Midcap oil and gas producer Premier Oil (LSE: PMO) achieved the primary exploration target of the 34/5-1 S wildcat well at production license 374 S in the Norwegian portion of the North Sea by making a petroleum discovery in the Cook formation, while the other formation Statfjord came up dry.
Small Cap News
Australia operating exploration company Thor Mining (AIM, ASX: THR) has appointed Trevor Ireland as a non-executive director. The appointment is the second major initiative for the company this year under its new growth strategy, the group said. Ireland is a geologist with more than 40 years experience in minerals exploration and corporate management.
Ethanol and biorefining group Lignol Energy Corporation (TSX-V: LEC) announced an agreement with UK construction prodocts supplier Kingspan Group PLC (LSE: KGP) for the joint development of commercial applications incorporating Lignol's class of High-Purity Lignin and lignin derivatives (HP-L lignin) into various products.
BPC (AIM: BPC) has placed 69.8 million new shares to raise £2.4 million to meet its working capital requirements and reiterated its intention to re-domicile from the Falkland islands to the Isle of Man.
Europa Oil & Gas (AIM: EOG) has updated investors on the testing of the Hykeham-1Z well, which was drilled on the PEDL150 license, a short distance from the Whisby Field in the UK. After conducting a casing pressure test yesterday, the company has confirmed that the original perforation charges failed to penetrate the well casing, and therefore there is currently no connection to the reservoir.
Altona Energy (AIM: ANR) has appointed Peter Fagiano as senior executive in charge of project technology to join the Arckaringa Joint Venture (JV) management committee, which is responsible for the JV’s operations and decision making on all key matters.
Mobile gambling specialist Probability (AIM: PBTY) said it has partnered with Mobenga, a Swedish provider of betting software. Probability will integrate into Mobenga's software platform and the groups will cooperate in marketing its games capability to Mobenga customers.
Navigation equipment maker Raymarine (AIM: RAY) noted the recent hike in its share price and confirmed it has received a further approach from a third party, which may or may not lead to an offer being made for the entire issued share capital of Raymarine at approximately 3.6 pence per share.
