FTSE 100 climbs as UK unemployment falls, commodities extend gains

Overview: the FTSE 100 moved in line with pre-trade projections, tacking on 0.5% after UK inflation data that came out today showed a lower than expected rate of 7.8% for the final quarter of 2009. In other news, minutes from the latest Bank of England policy meeting revealed that the members of the Policy Committee voted unanimously to free interest rates and keep the £200 billion quantitative easing programme on hold in March. Yesterday, the US Federal Reserve left its ultra low interest rates unchanged.

Software developer Autonomy Corporation (LSE: AU) led the blue chips with a 3.4% advance. Miner Fresnillo (LSE: FRES) and insurance focused investor Resolution (LSE: RSL) followed with gains of over 3%. Other notable risers included retailer Kingfisher (LSE: KGF) and clothing retailer Next (LSE: NXT), which added 2%.

Security services company G4S (LSE: GFS) and hedge fund manager Man Group (LSE: EMG) were the heaviest fallers in the index with losses of 4%. Tour company Thomas Cook (LSE: TCG) was down 3%, airline British Airways (LSE: BAY) declined 2.3% and satellite telecommunications company Inmarsat (LSE: ISAT) dropped 1.9%. Another retailer Marks and Spencer (LSE: MKS), communications services group WPP (LSE: WPP) and pharmaceutical company Shire (LSE: SHP) also lost nearly 2%.

US stocks opened higher as the Dow Jones Industrial Average gained 0.4%, the broader S&P 500 index advanced 0.6% and the technology heavy NASDAQ composite tacked on 0.55%.

Commodities

Oil prices climbed today after OPEC (Organization of Petroleum Exporting Countries) expectedly left its production quotas unchanged, expecting a healthy demand this year while crude prices are steady at slightly above US$80/barrel, which is believed to be a comfortable level for the organization.

Last week, both OPEC and EIA (Energy Information Administration) upped their respective crude demand forecasts for this year by 0.9 mmbbls/d (million barrels per day) to 85.24 mmbbls/d and by 1.6 mmbbls/d to 86.6 mmbbls/d.

May Brent Crude improved to US$81.46/barrel, while US light, sweet crude rose to US$82.17/barrel.

All blue chip oil and gas producers moved up, yet not by much. Cairn Energy (LSE: CNE) was in the lead, climbing 1.8%, while BG Group (LSE: BG) and Tullow Oil (LSE: TLW) followed with marginal gains. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) both added nearly 1%.

Oil and gas engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) also posted small gains.

Midcaps generally did better with all stocks posting gains of over 1% with the exception of JKX Oil & gas (LSE: JKX) and Soco International (LSE: SIA), which added less than 1% and Salamander Energy (LSE: SMDR), which lost 1.5%.

Dana Petroleum (LSE: DNX) rose 3.3% to take the lead, while Premier Oil (LSE: PMO) and Heritage Oil (LSE: HOIL) followed, adding nearly 2%. Melrose Resources (LSE: MRS) and Dragon Oil (LSE: DGO) moved up 1.4% and 1.1% respectively.

Service companies did well as Wellstream Holdings (LSE: WSM) and Wood Group (LSE: WG) added 2.7% and 2.4% respectively.

Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and oil and gas company with assets in Iraq, Syria and Gulf of Mexico, Gulfsands Petroleum (AIM: GPX) led the juniors, advancing 8% and 4% respectively. Mongolia-focused Petro Matad Ltd (AIM: MATD) added nearly 4%.

Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) slipped 4%.

Gold rallies to lift miners

Gold stabilised at about US$1,125/oz after reaching US$1,133/oz on weakness in the US dollar, which declined on the Federal Reserve’s decision to leave the interest rates at the current ultra low levels of 0% to 0.25%. The Fed said that the strength of the ongoing economic recovery did not warrant a rate increase, while inflation was likely to stay at a low level and the job market was slow to recover. This was in line with the Fed’s repeated pledge to keep the rates exceptionally low for an extended period of time.

Gold is seen as a hedge against inflation and a riskier alternative to the safe haven US dollar. The yellow metal normally moves inversely to the greenback, which fell against other major currencies following the Fed’s policy meeting. Gold has been on the rise so far this week, climbing from US$1,100/oz as the euro firmed against the US dollar on easing concerns over the ongoing debt crisis in several euro zone countries including Greece and Portugal.

Other precious metals also retreated after making gains with silver sliding to US$17.42/oz, while platinum declined to US$1,631/oz.

All major mining stocks were on the rise today with the sole exception of silver producer Hochschild Mining (LSE: HOC), which went against the tide for the second day in a row with a decline of less than 1%.

Silver and gold miner Fresnillo (LSE: FRES) was in the lead with a 3% advance, while gold miner Randgold Resources (LSE: RRS) followed with a small gain.

Specialty chemicals firm Johnson Matthey (LSE: JMAT) added less than 1%.

Aquarius Platinum (LSE: AQP) led the sector in the FTSE 250, climbing 4%, while gold miner Petropavlovsk (LSE: POG) rose 2.3%.

Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) led the juniors with a 13% advance. Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) and Western Australia operating Norseman Gold (AIM: NGL) followed, climbing 8% and 5.7% respectively.

Commodity asset development company Mercator Gold (AIM: MCR) and Philippines focused Metals Exploration (AIM: MTL) headed in the opposite direction, slipping 8% and 5% respectively.

Miners rise as copper and nickel extend gains

Base metals also rose today with copper and nickel reaching US$3.39/lb and US$9.99/lb respectively, while zinc improved to US$1.05/lb.

Anglo American (LSE: AAL) was in the lead, advancing 2.3%, while Kazakhmys (LSE: KAZ) and Rio Tinto (LSE: RIO) both added 2%. Vedanta Resources (LSE: VED) tacked on 1.9%, while BHP Billiton (LSE: BLT) and Xstrata (LSE: XTA) both added 1.5%.

Antofagasta (LSE: ANTO) and Eurasian Natural Resources (LSE: ENRC) tacked on nearly 1%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, climbing 1.4%.

Tantalum concentrate supplier with assets in Mozambique Noventa (AIM: NVTA) and zinc miner Connemara Mining (AIM: CON) led the juniors with gains of 8% and 6% respectively.

Nickel and iron ore exploration junior Landore Resources (AIM: LND) and copper and nickel explorer Regency Mines (AIM: RGM) slipped 4%.

Banks, insurance, private equity

Standard Chartered (LSE: STAN) led the banking stocks with a 1.7% climb. Royal Bank of Scotland (LSE: RBS) added 1.2%, while fellow part-nationalised bank Lloyds (LSE: LLOY) was flat, as was Barclays (LSE: BARC). HSBC (KSE: HSBA) tacked on nearly 1%.

Legal & General (LSE: LGEN), Aviva (LSE: AV) and Admiral Group (LSE: ADM) were the top performing insurers with gains of 1.6%, 1.3% and 1% respectively. Old Mutual (LSE: OML), Prudential (LSE: PRU) and RSA Insurance Group (LSE: RSA) added less than 1%.

Standard Life (LSE: SL) was at the bottom of the pile with a 3.6% decline.

Private equity group 3i (LSE: III) added almost 1%.

Small Cap Movers

Other notable movers among the small caps included developed of vision based industrial systems Seeing Machines (AIM: SEE), which soared 33% after landing a contract from subsidiaries of the world’s largest miner BHP Billiton (LSE: BLT).

Large and Mid Cap News

Hochschild Mining (LSE: HOC) has filed suit against Minera Andes Inc (TSX: MAI; OTC: MNEAF) of Alberta, Canada and its subsidiary Minera Andes SA in the New York State Supreme Court, asking that Minera Andes be required to execute formal loan agreement documents for the $65m project financing loan which was provided by Hochschild to the San José gold and silver project in Argentina.

Small Cap News

ECO Animal Health Group PLC (AIM: EAH) said ECO Animal Health Ltd has formed a joint venture with Pharmgate LLC of Ramsey, New Jersey, aimed at distributing the partners’ veterinary products in the North American livestock and poultry markets.

University IP commercialisation specialist Fusion IP (AIM: FIP) said its partner company Abcellute Holdings has gained a favourable opinion from a NHS Research Ethics Committee for its Abcellute Tissue Bank unit to operate as a Research Tissue Bank under NRES guidelines (National Research Ethics Service).

Alliance Pharma (AIM: APH) told investors that it has completed the transfer of a distribution agreement with Biovail Laboratories for the tetrabenazine drug, part of the recently acquired Cambridge Laboratories portfolio. Under the terms of the acquisition, completed in February, the product’s transfer was deferred subject to the successful transfer of the distribution deal.

Seeing Machines (AIM: SEE) landed its biggest contract to date for its DSS product suite in the mining sector, agreeing to supply it to BHP Billiton (LSE: BLT, ASX: BHP) subsidiaries BHP Navajo Coal Company and San Juan Coal Company, which are part of BHP’s Energy Coal business unit.

Gemfields (AIM: GEM) has held its first rough emerald and beryl auction of 2010 in Jaipur, India, from 11-15 March, selling 89% of material by value for US$7.2 million and setting what the company said was a world record in terms of the volume for Zambian emerald and beryl on offer by weight, at 5.78 tonnes of material on offer.

Strategic Natural Resources (AIM: SNRP) (SNR) said it is raising £2.9m through a placing of 19.1m new shares at 15p, and plans to use net proceeds to fund the development and commercialisation its mining assets in the Eastern Cape of the Republic of South Africa, and to enable it to repay a short term debt facility.

African Aura Mining (AIM: AAAM, TSX-V: AUR) said its Putu iron ore project was fully on track as the target of at least 1 billion tonnes of NI 43-101 compliant resource has already been achieved, with a “significantly larger” resource anticipated by the company and its joint venture partner Severstal.

Forte Energy (AIM, ASX: FTE) has had a busy first half in which it undertook extensive exploration. During the period to end-December 2009, the company completed the second tranche of a US$12 million capital raising to help fund its accelerated exploration activities in West Africa. The company had cash of US$5.9 million at the end of the period compared to US$4.2 million a year earlier and US$6.6 million at 30 June 2009.

Range Resources (AIM: RRL, ASX: RRS), the diversified oil and gas junior with assets in Somalia, Georgia and the United States, narrowed its net loss in the first half to end-December 2009 to US$1.7m compared to US$5.59m in the comparable period of 2008. In terms of its operations, the company noted considerable progress during the period.

Aminex (AIM: AEX) said that wireline logs from the Olympia Minerals-1 (OM-1) well at Shoats Creek, Louisiana, have identified several potential oil and gas bearing intervals in Cockfield sands between 8,200 and 9,335 ft, which closely match the prognosis obtained by interpretation and mapping of new 3D seismic over the property.

Through their respective notes to investors, London-based stockbrokers, FinnCap and Arbuthnot securities commented on smartFOCUS Group (AIM: STF), which earlier today reported solid results for FY 2009. In the 12-months ended 31 December 2009, the company said it continued to shift its revenue model towards ‘Software as a Service’, commonly referred to as ‘SaaS’.

smartFOCUS Group (AIM:STF) reported solid results for the 12 month period ended 31 December 2009 (FY 2009) as it continued to shift its revenue model towards ‘Software as a Service’, more commonly referred to as ‘SaaS’. The company provides marketing software to a wide range of blue chip companies – including Rank (LSE:RANK), Carnival Group (LSE:CCL) and Easyjet (LSE:EZJ) - which help improve customer responsiveness and retention, hence a number of smartFOCUS’s clients operate in sectors where effective communication with their customers is a key corporate objective (retailers, finance, media, gambling, leisure, tourism).