Overview: the FTSE 100 managed to recover from a slow start, rising 0.4% after US stocks surged in early trade as investors cheered today’s US housing update. The Commerce Department said that new home sales beat forecasts with an increase of 330,000 in June. The housing data helped offset a decline in the Chicago Fed national activity index and a 0.1% decline in UK home prices, which was reported today.
Financial Times publisher Pearson (LON:PSON) and oil and gas producer Tullow Oil (LON:TLW) emerged atop the leaderboard with gains of 4.5%. BP (LON:BP) and banking group Barclays (LON:BARC) followed, advancing 4%. Other notable risers included hedge fund manager Man Group (LON:EMG) and specialist banking group Investec (LON:INVP) with gains of 2.7% and 2.3% respectively.
Chipmaker ARM Holdings (LON:ARM) and African Barrick Gold (LON:ABG) were at the bottom of the pile with losses of over 3% and 2.5%. Medical devices manufacturer Smith & Nephew (LON:SN) lost nearly 2%, while pharmaceutical company GlaxoSmithKline (LON:GSK) and defence contractor Cobham (LON:COB) dropped 1.5%.
US markets were in buying mode in the morning. The Dow Jones Industrial Average, the broader S&P 500 index and the technology heavy NASDAQ composite rose 0.4%.
Commodities
Oil prices retreated today as equity markets both in the US and Europe inched lower after rising on the results of the stress test of European banks , which came out on Friday, showing that just seven of them failed to pass. This was better than the 10 failures predicted by investment bank Goldman Sachs (NYSE:GS). However, the results were not convincing enough as many commentators questioned why all Greek banks but just one were able to pass the test and show they could survive a double dip recession.
Crude futures have been moving along with equities as traders were taking their cues from US and European economic data, which has generally been positive over the past few weeks, helping the markets recover from the steep falls experienced in June. However, today’s UK house prices update revealed a 0.1% drop in July, pushing the FTSE 100 down after a bullish start.
September Brent Crude declined to US$76.87/barrel, while US light, sweet crude for September delivery slid to US$78.49/barrel.
Tullow Oil (LON:TLW) was the top performing blue chip oil and gas producer, rallying 3.8% after announcing a discovery in Ghana. BP (LON:BP) climbed 2.2% on reports that battered Chief Executive Tony Hayward would resign. Fellow supermajor Shell (LON:RDSB) posted a small gain, while BG Group (LON:BG) and Cairn Energy (LON:CNE) advanced 1.7% and 1.1% respectively.
Petrofac (LON:PFC) tacked on 1%, while another oil and gas engineering firm Amec (LON:AMEC) was sitting just below the opening level.
Midcaps were mixed. Melrose Resources (LON:MRS) was in the lead with a 1.5% advance. Dragon Oil (LON:DGO) added 1%, Salamander Energy (LON:SMDR) and Heritage Oil (LON:HOIL) posted small losses, while Soco international (LON:SIA) declined 1%, JKX Oil & Gas (LON:JKX) and Premier Oil (LON:PMO) shed 1.2% and 1.5% respectively and Dana Petroleum (LON:DNX) dropped 2%.
Wood Group (LON:WG) was flat, while fellow services company Wellstream Holdings (LON:WSM) added 1.2%.
Energy investor Xtract Energy PLC (LON:XTR) was among the top performing juniors with an 8% gain. North American based explorer Nighthawk Energy (LON:HAWK) and Iraq and Algeria operating Gulf Keystone Petroleum (LON: GKP) added 6% and 5% respectively.
EU operating Rome-based oil junior Mediterranean Oil & Gas (LON:MOG) and Africa focused energy company Dominion Petroleum (LON:DPL) headed in the opposite direction with losses of 6% and 5% respectively.
Gold and silver decline to weaken miners
Gold retreated today after nearly recapturing the US$1,200/oz mark late last week when safe haven buying increased on fears over Europe’s debt situation and the health of its banking system. Banking stocks were in decline prior to the release of the stress test results, which revealed that just seven out of the 91 banks tested failed to show they could withstand another crisis. Goldman Sachs (NYSE:GS) expected at least 10 banks to fail.
Gold declined to US$1,187/oz. Silver followed, falling to US$18.03/oz, but platinum did better, improving to US$1,543/oz.
Major mining stocks were mixed today. Silver miner Fresnillo (LON:FRES) lost 3%, while gold producers African Barrick Gold (LON:ABG) and Randgold Resources (LON:RRS) declined 2% and 1% respectively. Platinum miner Lonmin (LON:LMI) was flat.
Specialty chemicals firm Johnson Matthey (LON:JMAT) was sitting just below the opening level.
Midcaps did better. Aquarius Platinum (LON:AQP) added 1.5%, while gold miner Petropavlovsk (LON:POG) and silver producer Hochschild Mining (LON:HOC) tacked on less than 1%.
Africa focused gold deposit developer Cluff Gold (LON:CLF) led the juniors with a 12% rally. UK-registered China operating copper and gold miner Central China Goldfields (LON:GGG) advanced 8%, while commodity asset development company Mercator Gold (LON:MCR) and Uzbekistan focused gold miner Oxus Gold (LON:OXS) climbed 6%.
Africa operating gold miner GMA Resources (LON:GMA) and junior diamond miner Stellar Diamonds (LON:STEL) declined 9% and 8% respectively, while Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) slipped 6%.
Base metals rise
Copper and nickel rose to US$3.18/lb and US$9.23/lb, while zinc was steady at US$0.85/lb.
Base metal miners didn’t show much movement today. Anglo American (LON:AAL), Antofagasta (LON:ANTO), Eurasian Natural Resources (LON:ENRC) and Rio Tinto (LON:RIO) were flat, while BHP Billiton (LON:BLT) and Xstrata (LON:XTA) were sitting just below the opening level. Vedanta Resources (LON:VED) was at the bottom of the pile with a 1.6% loss. Kazkahmys (LON:KAZ) did better, tacking on less than 1%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) shed 1%.
Mineral sands producer Kenmare Resources (LON:KMR), iron ore focused investor Red Rock Resources (LON:RRR) and South Africa based coal exploration and production company Strategic Natural Resources (LON:SNR) lost 5%.
Zinc miner Connemara Mining (LON:CON) outperformed the sector with an 8% surge. Finders Resources (LON:FND) and Indonesia operating coal miner Churchill Mining (LON:CHL) did better, climbing 6% and 5% respectively.
Banks, insurance, private equity
Barclays (LON:BARC) led the banking stocks with a 4% climb. Part-nationalised banks Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) followed, advancing 3.4% and 3% respectively.
Standard Chartered (LON:STAN) posted a small gain and HSBC (LON:HSBA) was flat.
Old Mutual (LON:OML), Legal & General (LON:LGEN) and RSA Insurance Group (LON:RSA) led the insurance companies with gains of 2.2%, 1.3% and 1% respectively.
Admiral Group (LON:ADM), Aviva (LON:AV) and Standard Life (LON:SL) posted small gains.
Prudential (LON:PRU) stood just below the opening level.
Private equity group 3i (LON:III) tacked on less than 1%.
Small Cap Movers
Other notable movers among the small caps included South Africa operating power producer IPSA Group (LON:IPSA) and developer of CAD and image analysis software Medicsight (AIM: MDST) with losses of 6% and 7.5% respectively and supplier of virtual queuing systems Lo-Q (LON:LOQ), which rallied 9%.
Small Cap News
ECO Animal Health Group (LON:EAH) told investors that its Chinese manufacturing facility has been approved by the US Federal Drug Administration (FDA), following a successful Good Manufacturing Practice (GMP) inspection.
Petroceltic International (LON:PCI) has hired a Dubai-based drilling contractor Dalma Energy for a four-hole appraisal programme on the Isarene permit, Algeria. The company believes that the Ain Tsila gas discovery, which is hosted on Isarene, “may turn out to be a world class hydrocarbon resource”.
Oil and gas company with assets in Iraq, Syria and Gulf of Mexico, Gulfsands Petroleum (LON:GPX) has said that gross oil production from the Khurbet East and Yousefieh fields combined has been increased to 20,000 bopd (barrels of oil per day) for July and that early production and pressure data from the Yousefieh field has indicated a better than expected reservoir performance.
Frontier Mining (LON:FML) has now begun continuous leaching operations at the Koskuduk deposit on the Naimanjal licence in northeast Kazakhstan, after completing its second gold pour, for 329oz of gold and 1,000oz of silver. The company plans to leach 500,000 tons of ore in 2010, it has already extracted 135,000 tons, and 75,000 tons is currently on the leach pads.
Plant Health Care (LON:PHC) has signed a non-exclusive agreement with Syngenta’s (NYSE:SYT, ZUR:SYNN) Crop Protection subsidiary to develop and market Plant Health Care's Harpin protein as a foliar spray in combination with Syngenta's herbicide products - containing glyphosate.
Provider of software and software-led services for the filmed entertainment market, ZOO Digital Group (LON:ZOO) has launched an automated style-guide production system for home entertainment products and has secured Warner Home Video International as its first customer.
Nighthawk Energy (LON:HAWK, OTC:NHEGY) has revealed that it has now signed seven confidentiality agreements with prospective partners, consisting of significant US and international firms, regarding the Jolly Ranch oil shale project in Colorado.
West Africa focused gold miner Goldstone Resources (LON:GRL) has completed an electromagnetic survey to find extensions to the Homase concession in Ghana and hired a contractor to conduct a drilling programme to test the possible depth extensions to the ore body.
Viridas (LON:VIR) is set to supply an unnamed UK energy generator with 240,000tpa (tonnes per annum) of sustainable biomass for electricity generation. The company said that it now has potential revenues worth up to US$1bn over a ten year period.
At today’s AGM, Petrel Resources (LON:PET) managing director David Horgan told investors that the company has overcome serious difficulties in recent years, and it now faces the future with renewed confidence. In recent week’s the company has resolved the Subba and Luhais impasse in Iraq and with US$7m in the coffers, and a 10% profit sharing agreement in-hand, it is now looking for “big potential projects”.
Renewable Energy Holdings’ (LON:REH) 30%-owned associate Carnegie Wave Energy (ASX:CWE) is preparing to launch a new project to evaluate the integration of proven ‘off-the shelf’ desalination technology with its proprietary CETO wave power technology, to produce emission-free desalinated freshwater.
Large and Mid Cap News
Shares in BP (LON:BP) rose almost 3 per cent in early trade as the oil major began to lay the groundwork for the departure of gaffe prone boss Tony Hayward.
Tullow Oil (LON:TLW) has announced that its Owo-1 exploration well in Ghana in the Deepwater Tano license offshore Ghana has intersected a “significant column of excellent quality light oil,” establishing Owo as a “major new oilfield requiring further appraisal.”
Oil and gas producer and FTSE 250 constituent Dana Petroleum (LON:DNX) has announced the commencement of drilling at the Anne Marie exploration well at its 25% owned Anne Marie prospect and license area.
Set-top box manufacturer Pace (LON:PIC) is tapping into the internet TV market and broadening its customer base in the US after agreeing to acquire broadband equipment maker 2Wire for £308 million.
Shares in British social housing group Connaught (LON:CNT) collapsed this morning, dropping over 80% and wiping approximately £115m from its market value , after the company revealed that it will breach its banking covenants.
William Hill this morning unveiled plans to move its telephone betting offshore and said it was mulling whether to close a number of loss-making branches.