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FTSE 100 trims gains after Dow Jones, S&P 500 and NASDAQ open flat

Overview: the FTSE 100 gained nearly 1% early in the day as banking stocks rallied on news from the Basel Committee, which said it would loosen up the liquidity and capital rules laid out in its Basel III reform. Swiss bank UBS (NYSE:UBS) added to the sentiment, reporting a quarterly net profit of US$1.9 billion to provide more support for the banking sector. However, gains in US and European shares were trimmed after it was reported that US consumer confidence fell from 54.3 to 50.4, hitting five week lows. The FTSE 100 stood 0.1% above the opening level at the end of the session.

Banks Barclays (LON:BARC), Lloyds (LON:LLOY) and RBS (LON:RBS) led the way with gains of 7-8%. Insurer Prudential and software developer Autonomy Corporation (LON:AU) followed, climbing 3%. Interdealer broker ICAP (LON:IAP) and pharmaceutical company AstraZeneca (LON:AZN) added about 2.5%.

Intercontinental Hotels Group (LON:IHG) was at the bottom of the pile with a 7.5% loss. Other notable risers included chipmaker ARM Holdings (LON:ARM), which declined 3.2% , temporary power provider Aggreko (LON:AGK) and food manufacturer Unilever (LON:ULVR) with declines of 2.2%. Fashion house Burberry (LON:BRBY) and credit information group Experian (LON:EXPN) lost 2%.

US stocks were off to a slow start. The Dow Jones Industrial Average climbed 0.1%, while the broader S&P 500 index posted a marginal gain and the technology heavy NASDAQ composite slid 0.1%.


Oil prices moved higher today, aided by a strong upward trend in equity markets, which beat pre-trade projections of a flat start following yesterday’s mixed data that came out in the US. The mood in the markets improved today after the Basel Committee said it would loosen up the liquidity and capital rules laid out in its Basel III reform.

Goldman Sachs (NYSE:GS) noted the high inventories and concerns that the ongoing recovery is too sluggish in this week’s analytical report, also lowering its near-term prices for crude oil to the lower end of the US$85-95/barrel range. However, the investment bank offered a positive outlook for the second half, saying that the current fundamentals in the market coupled with further economic growth

could support the prices at a much higher level.

The American Petroleum Institute (API) is due to release its inventories report today, while most closely watched data from the Energy Information Administration (EIA) will be released tomorrow.

September Brent Crude improved to US$77.72/barrel, while US light, sweet crude for September delivery reached US$79.05/barrel on the New York Mercantile Exchange (NYMEX).

Tullow Oil (LON:TLW) was the top performer among the blue chips with a 2.3% gain. BG Group (LON:BG) and Cairn Energy (LON:CNE) followed, tacking on just over 2%. BP (LON:BP) posted a small loss after reporting a £11 billion loss in the first half of 2010. Fellow supermajor Shell (LON:RDSB) was flat.

Amec (LON:AMEC) was unmoved, while another oil and gas engineering firm Petrofac (LON:PFC) lost nearly 1%.

Most midcaps rose. Salamander Energy (LON:SMDR) was in the lead with a 4.2% advance. Heritage Oil (LON:HOIL) and Dragon Oil (LON:DGO) climbed 2.3% and 1.6% respectively. Dana Petroleum (LON:DNX) and Soco International (LON:SIA) added nearly 1%.

JKX Oil & Gas (LON:JKX) and Melrose Resources (LON:MRS) were flat and Premier Oil (LON:PMO) lost almost 1%.

Services companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) added 1%.

EU operating Rome-based oil junior Mediterranean Oil & Gas (LON:MOG) led the juniors with an 8% climb. Energy investor Xtract Energy PLC (LON:XTR) and Atlantic Canada operating oil and gas

group Enegi Oil (LON:ENEG) slipped 12% and 5% respectively.

Gold remains below $1,185

Gold was supported by increased physical buying and a weak US dollar today, however, that was not enough to get back to US$1,190/oz or even stay at the US$1,185/oz level it held this morning. As equities were rising, investors were pouring money into riskier assets such as the euro, which hit 11 week highs against the US dollar today.

Gold stood at US$1,183/oz in late afternoon, while silver and platinum climbed to US$18.21/oz and US$1,557/oz respectively.

Major miners were mixed. Gold miners were in decline with Randgold Resources (LON:RRS) and midcap Petropavlovsk (LON:POG) shedding 3%. African Barrick Gold (LON:ABG) stayed flat after releasing its quarterly results.

Silver producers Fresnillo (LON:FRES) and Hochschild Mining (LON:HOC) lost nearly 1%. Platinum miners did much better with Lonmin (LON:LMI) and Aquarius Platinum (LON:AQP) advancing 1.2% and 2% respectively.

Specialty chemicals firm Johnson Matthey (LON:JMAT) rose 1%.

Brazil focused gold miner Horizonte Minerals (LON:HZM) and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) led the sector, surging 22% and 14% respectively. UK-registered China operating copper and gold miner Central China Goldfields (LON:GGG) followed, climbing 9%.

Junior diamond company Stellar Diamonds (LON:STEL) headed in the opposite direction, declining 7%.

Base metals fall

Copper and nickel slid to US$3.20/lb and US$9.32/lb, while zinc dropped to US$0.85/lb.

Base metal focused miners were mixed. Anglo American (LON:AAL), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) posted small losses, while Kazakhmys (LON:KAZ) and Vedanta Resources (LON:VED) climbed 1.7% and 3% respectively. Antofagasta (LON:ANTO) and Eurasian Natural Resources (LON:ENRC) were sitting just below the opening levels. Xstrata (LON:XTA) was little moved.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) was flat.

Juniors didn’t show much movement today. Finders Resources (LON:FND) lost 5.5%, while Botswana operating nickel and copper miner Discovery Metals (LON:DME) added 5%.

Banks, insurance, private equity

Banking stocks were in demand today. Barclays (LON:BARC) led the pack with a 8% gain. Part-nationalized banks Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) surged 7%. Standard Chartered (LON:STAN) and HSBC (LON:HSBA) added just over 1.5%.

Prudential (LON:PRU) was the top performer in the insurance sector with a 3.1% advance. Aviva (LON:AV) and Standard Life (LON:SL) tacked on more than 2%. Old Mutual (LON:OML) and RSA Insurance Group (LON:RSA) advance 1.5% and 1% respectively.

Admiral Group (LON:ADM) and Legal & General (LON:LGEN) posted small losses.

Private equity group 3i (LON:III) climbed 2.4%.

Small cap movers

Other notable movers among the small caps included NetPlay TV (LON:NPT), which slipped 19%.

Small Cap News

Medusa Mining (LON:MML, ASX:MML, TSX:MLL) has promoted Peter Hepburn-Brown from his role as a non-exec director to a new position of executive director of operations.

Ambitious mining junior Horizonte Minerals (LON:HZM) this morning unveiled terms of a ‘transformational’ deal that could create one of biggest nickel projects in Brazil.

Noventa (LON:NVTA) told investors that tantalum recovery at the Marropino Mine in Mozambique, has increased steadily since the re-start and has been at a consistent 51% since the end of June 2010, which is a significant increase over historic levels. The mine re-started operations in April, after spending just under a year on care-and-maintenance.

Broker finnCap issued a positive note on ZOO Digital (LON:ZOO) after the company launched its automated style-guide production system for home entertainment products and announced Warner Home Video as its first customer, saying the new product would help it achieve the goal of diversifying revenues.

A strong performance in Asia

and Europe offset a lacklustre showing in Nigeria, according to PZ Cussons (LON:PZC), the maker of Imperial Leather soap.

African Aura Mining (LON:AAAM, TSX-V:AUR) has started a first phase 4,200 metre initial resource definition drilling programme at its wholly owned Nkout iron ore project in southern Cameroon after an airborne geophysical survey returned “encouraging results”, defining a major iron ore target.

Chaarat Gold’s (LON:CGH) Chinese investment partner, China Nonferrous Metals International Mining Co Ltd (CNMIM), has decided to subscribe for new shares worth £2m. Through the transaction, CNMIM will maintain its 19.9% equity stake in the company following the recent £3.85m equity placing and the share-based acquisition of Kryex.

Sweeteners producer PureCircle (LON:PURE) has signed a Memorandum of Understanding with British Sugar Group to set up 50/50 joint venture Natural Sweetness Company, which will develop and market a range of products for the food and beverage industries.

Machine-2-Machine (M2M) telecoms specialist Telit Communications (LON:TCM) has agreed a commercial partnership with France Telecom's Orange Business Services unit, under which Telit will distribute Orange's complete range of M2M solutions on the French market, by adding them to its own modules.

Essex-based building contractor, Mountfield Group (LON:MOGP) has been selected as a preferred building contractor for a number of construction contracts in connection with the 'SnOasis' indoor winter sports resort, which is being built near Ipswich in Suffolk. The £300m project will incorporate facilities for 14 winter sports disciplines, along with 400 residential units, 350 chalets, a hotel and conference facilities.

KEFI Minerals (LON:KEFI) told investors that non-executive deputy chairman Ian Plimer yesterday bought 1.6 million further shares in the company at 0.8p each, raising his holding to 3.6 million shares, or 1.3 percent of the capital.

Argos Resources looks set to join a select group of oil and gas explorers, who have grown a strong following among AIM’s investment community. The currently unlisted company owns a number of prospective interests in the North Falkland basin, and with growing investor interest in the region it has raised £22m and it is set to join the AIM market later this week.

Large and Mid Cap News

BP (LON:BP) confirmed the ejection of hapless boss Tony Hayward as it set aside US$32 billion to meet the cost of the Gulf of Mexico disaster.

A buyout firm and a pension fund have agreed a £2.9 billion deal to buy the British car parts maker Tomkins (LON:TOMK, NYSE:TKS) Onex and the Canadian Pension Investment Board have tabled a knock-out 325p a share cash bid, which has been accepted by the Tomkins board.

Daily Mail & General Trust (LON:DMGT) revealed that trading for its financial third quarter was ahead of forecast with the B2B and consumer businesses driving the revival.

Croda International (LON:CRDA) benefited from the cyclical recovery in the chemicals industry as it reported a more than doubling of interim profits. The specialty chemicals group said underlying pretax earnings advanced 108 per cent to £96.2 million in the six months to June 30.

Patagonia Gold (LON:PGL) has acquired the freehold land rights over the Estancia El Rincon in the Santa Cruz province of Argentina - a 6,700 hectare area which hosts the Lomada de Leiva heap leach gold project, on the La Paloma concession - for US$804,000. The company initially acquired the Lomada project in 2007, with the purchase of the Paloma concessions form Barrick Gold (NYSE, TSX: ABX).

Chipmaker ARM Holdings (LON:ARM) has benefited from boom in smartphones and the launch of iPad as it revealed a sharp rise in second quarter earnings. The group said pre-tax profits jumped 167 per cent in the three months to June 30 to £43.5 million.

For its first quarter, British motoring accessories and outdoor retailer Halfords (LON:HFD) reported a 1.9% drop in like-for-like sales. The company blamed “consumer nervousness” before May’s general election, and its decision to delay the ‘Summer Leisure’ promotional campaign due to the World Cup. Despite the drop, the company said it is still on track for earnings growth in line with its previous guidance.

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July 31 2012

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