Overview: the FTSE 100 retreated today following yesterday’s rally after it was reported that personal consumption in the US declined by US$2.9 billion in June, while savings climbed from US$713.9 billion to US$725.9 billion. The UK’s blue chip index stood 0.35% below the opening level in late afternoon today.
Energy company Centrica (LON:CNA) emerged atop the leaderboard with a 3.7% gain. Airline British Airways (LON:BAY) and bank Standard Chartered (LON:STAN) followed, climbing 2%. British American Tobacco (LON:BATS) added 1.5%, while hedge fund manager Man Group (LON:EMG), pharmaceutical company Shire (LON:SHP) and power generation company International Power (LON:IPR) added just over 1%.
Chipmaker ARM Holdings (LON:ARM) was at the bottom of the pile with a 6.5% loss. Specialist banking group Investec (LON:INVP) dropped 6% and commercial property company Segro (LON:SGRO) slipped 3.3%. Turbine manufacturer Rolls-Royce (LON:RR) lost 3%, while Capital Shopping Centres Group (LON:CSCG), another property company Hammerson (LON:HMSO) and Essar Energy (LON:ESSR) shed 2.3-2.4%.
US stocks opened with small losses. The Dow Jones Industrial Average and the broader S&P 500 index declined 0.1%, while the technology heavy NASDAQ composite slid 0.15%.
Commodities
Oil managed to break through a key resistance level at US$80/barrel today after markets in Europe, US and Asia rallied on increasing recovery optimism. European stocks surged with the FTSE 100 gaining 2.65% after HSBC (LON:HSBA) opened the reporting week in the banking sector with a better than expected interim report, which showed a twofold jump in profits to £7 billion. The markets got more good news later in the day when the Commerce Department said that construction spending unexpectedly increased in June. While US manufacturing PMI (purchasing managers index) declined in June, but the reading of 55.5 still was better than expected.
Yield on Treasuries declined by 3% as riskier assets came in demand.
September Brent Crude improved to US$81.61/barrel, while US light, sweet crude climbed to US$81.84/barrel.
Supermajors BP (LON:BP) and Shell (LON:RDSB) stood just above the opening level. Fellow FTSE 100 constituents Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW) rose 1.5%, while BG Group (LON:BG) was flat.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) slipped 1.3% and 2.1% respectively.
Most midcaps were in decline.
Dragon Oil (LON:DGO), Dana Petroleum (LON:DNX), Melrose Resources (LON:MRS), JKX Oil & Gas (LON:JKX) and Soco International (LON:SIA) posted small losses. Salamander Energy (LON:SMDR) declined 1.7%.
Heritage Oil (LON:HOIL) was the top performing stock in the sector with a 5.4% rally. Premier Oil (LON:PMO) followed with a 1.5% gain.
Wood Group (LON:WG) gained less than 1%, while fellow services company Wellstream Holdings (LON:WSM) dropped 1.2%.
Europe focused oil and gas developer Ascent Resources (LON:AST) led the juniors with a 6% climb. Energy investor Xtract Energy PLC (LON:XTR) and US focused oil and gas junior Caza Oil & Gas (LON:CAZA) were in the red with losses of 9% and 5.5%.
Gold reaches $1,185
Gold prices climbed after China’s People’s Bank said it would allow more foreign companies to trade on the Shanghai Gold Exchange, which will lead to an increase in imports and exports of the yellow metal. Gold demand has increased during H1 in China after the government introduced a series of monetary tightening measures to prevent the booming economy from overheating, prompting investors to put more money into safe haven assets.
China’s decision to loosen up its gold market has a positive impact on the gold price, which got more support from a strong physical demand from the world’s largest gold consumer India ahead of the upcoming festival season.
Bank UBS (NYSE:UBS) said that its gold sales to India reached the highest level in 20 months.
Gold improved to US$1,185/oz today. Silver followed, rising to US$18.40/oz, while platinum declined to US$1,588/oz.
Major mining stocks were mixed. Gold miner Randgold Resources (LON:RRS) declined 1.2%, while peer from the FTSE 250 Petropavlovsk (LON:POG) posted a small loss. African Barrick Gold (LON:ABG) did better, posting a small gain.
Silver miner Fresnillo (LON:FRES) was just above the opening level and platinum miner Lonmin (LON:LMI) was flat.
Silver producer Hochschild Mining (LON:HOC) was little moved, while another midcap Aquarius Platinum (LON:AQP) slipped 5.3%.
Specialty chemicals firm Johnson Matthey (LON:JMAT) was sitting just below the opening level.
Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) soared 50% to take the lead in the sector. Turkey focused gold miner Ariana Resources (LON:AAU), Africa operating gold miner GMA Resources (LON:GMA) and copper and gold miner EMED Mining (LON:EMED) followed, climbing 15%, 13% and 10% respectively. Canada based junior gold developer Rambler Metals and Mining Plc (LON:RMM) moved up 7%.
Junior diamond producer Stellar Diamonds (LON:STEL) and commodity asset development company Mercator Gold (LON:MCR) headed in the opposite direction, slipping 10% and 7.5% respectively.
Miners fall as base metals decline
Copper and nickel declined to US$3.33/lb and US$9.66/lb respectively. Zinc followed, sliding to US$0.93/lb.
Antofagasta (LON:ANTO), Eurasian Natural Resources (LON:ENRC) and Rio Tinto (LON:RIO) posted small gains, while Anglo American (LON:AAL) and Vedanta Resources (LON:VED) rose 1.1%.
Kazakhmys (LON:KAZ) climbed 1.5%.
Xstrata (LON:XTA) was unmoved.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) moved with the market, shedding 1.5%.
Russia focused copper and nickel miner Amur Minerals (LON:AMC) led the juniors, rallying 17.5%. Finders Resources (LON:FND) and tantalum concentrate supplier with assets in Mozambique Noventa (LON:NVTA) climbed 8% and 5.5% respectively.
Laterite nickel specialist European Nickel (LON:ENK) and South American focused junior miner Herencia Resources (LON:HER) lost 6.5% and 5.5%.
Banks, insurance private equity
Standard Chartered (LON:STAN) led the banking sector with a 2% gain. Barclays (LON:BARC) and Lloyds (LON:LLOY) shed 1%, HSBC (LON:HSBA) slipped 1.6% and Royal Bank of Scotland (LON:RBS) posted a small loss.
Standard Life (LON:SL) led the insurance companies with a 1.2% advance. Aviva (LON:AV) and Prudential (LON:PRU) posted small gains.
Admiral Group (LON:ADM) was flat.
Old Mutual (LON:OML) and Legal & General (LON:LGEN) declined 2.2% and 1.1% respectively. RSA Insurance Group (LON:RSA) was sitting just below the opening level.
Private equity group 3i (LON:III) was flat.
Small Cap Movers
Other notable movers among the small caps included latin America focused power generator Rurelec (LON:RUR), which rallied 12%.
Small Cap News
Forte Energy (ASX: FTE, LON:FTE) has reported the key management appointment of Brad George as Chief Operating Officer. George is a qualified geoscientist with over 20 years extensive global mining industry knowledge.
Mobile email and data synchronization group Synchronica PLC (LON:SYNC) has stated that its flagship push-email and synchronization product Mobile Gateway complies with lawful interception legislation, responding to press reports that products based on proprietary technologies and hosted in offshore data centres (NOCs) could be banned by regulators.
Irish oil and gas exploration company Petroceltic International (LON:PCI) has announced that the Oryx-1 exploration well on the Ksar Hadada Permit in Tunisia will now be plugged and abandoned after failing to discover any economic resources, while noting that it had zero financial exposure in the programme.
Ormonde Mining (LON:ORM) has received a geological report on its properties in the Salamanca province in Spain, which it said outlined significant gold potential and recommended priority drilling targets on the main prospects identified to date.
Oil and gas company with assets in Iraq, Syria and Gulf of Mexico, Gulfsands Petroleum (LON:GPX) noted the announcement from ADX Energy (ASX:ADX), which said that drilling operations on the Lambouka-1 well recommenced last week and will include the drilling of a 1,340 metre deep hole to the base of the Birsa Sandstone formation.
The latest drill results announced yesterday from Ariana Resources (LON:AAU) puts the value added to the group’s assets at an estimated £1 million, or 20 percent of Ariana’s market capitalisation of the immediately prior to the announcement, Edison Investment Research announced in a note.
Rambler Metals & Mining (LON:RMM, TSX-V:RAB) has found some short term cashflow that will help it through the tricky 10-month construction of its Ming copper-gold mine. It will process ore from Tenacity Gold Mining's two projects at its Nugget Pond mill in Newfoundland, Canada. Rambler will handle 63,000 tonnes of earth excavated from the Deer Cove and Stog'er Tight Gold mines in a toll processing agreement that is likely to last at least six months. The ‘cost plus’ deal will begin on August 30 at the latest.
Large and Mid Cap News
Transnational miner Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO), the world's No 2 name in seaborne iron ore, has upped the ante in West Africa's iron ore race, the biggest in global mining, by announcing a further USD 170m investment in Guinea's Simandou, following USD 650m investment to date. After discovering Simandou in 2004, the iron ore system, 95% claimed by Rio Tinto, rapidly developed into one of the world's biggest mining hits.
Newly-appointed ITV (LON:ITV) chief executive Adam Crozier has hit the ground running with a decisive move into pay-TV. The deal will see three of the free-to-air broadcaster’s high definition channels shown on rival Sky’s subscription platform and was announced alongside a £75 million additional investment in programming.
Independent oil and gas production & development company EnQuest PLC (LON:ENQ) said it entered an agreement to acquire the entire issued share capital of Stratic Energy Corp (TSX-V:SE LON:SE), valuing the business at approximately US$45.7 million.
Aircraft parts supplier Meggitt (LON:MGGT) predicted civil and military aviation sales will increase in the second half as it reported a 3 per cent rise in first half profits.
Capital & Counties (LON:CAPC), the owner of Covent Garden and the Earls Court and Olympia exhibition centres, reported a robust start to life as an independent company.
Mining giant Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO) said it will invest a a further US$790 million in its drive to expand the annual capacity of iron ore operations in the Pilbara region, Western Australia, to 330 million tonnes. This brings total investment funds approved in recent weeks to US$1 billion.
Talisman Energy Inc (TSX:TLM, NYSE:TLM) and Ecopetrol SA have agreed to acquire BP (LON:BP) subsidiary BP Exploration Co (Colombia) Lt for US$1.9 billion in cash.