Overview: the FTSE 100 rallied 1.1% today as higher oil and metal prices bolstered mining and energy stocks, while banks were buoyant on the news that the Basel Committee on Banking Supervision passed new requirements for tier-one capital ratio, giving banks until 2019 to comply.
Plumbing and heating equipment manufacturer Wolseley (LON:WOS) led the blue chips with a 4% advance. Copper miner Kazakhmys (LON:KAZ), part-nationalised Lloyds (LON:LLOY) and insurer Prudential (LON:PRU) rose 3.5%. Hospitality copany Whitbread (LON:WTB) and defence and systems manufacturer BAE Systems (LON:BA) tacked on just over 3.2%.
Tour operator TUI Travel (LON:TT), Associated British Foods (LON:ABF) and specialist distribution group Bunzl (LON:BNZL) shed just over 1%. No other FTSE 100 constituent lost 1% or more.
US stocks were off to a positive start. The Dow Jones Industrial Average rose 0.7%, the broader S&P 500 index advanced 1% and the technology heavy NASDAQ composite climbed 1.15%.
Commodities
It was reported over the weekend that China’s industrial production surged 13.9% year on year in August, inspiring optimism that the economic expansion of the world's second largest energy consumer will continue.
China's bullish production figures more than offset the negative impact from another update, which showed an increase in the inflation rate to an annualised 3.5% in August from 3.3% in July, reaching the highest level in nearly two years. The inflation was largely driven by a 7.5% rise in food prices due to the widespread floods that hit the country last month.
That data, however, had little influence on stock and commodity markets as the price increases in China are seen as temporary and aren’t likely to prompt the government to introduce further monetary policy tightening measures to curb inflation.
Speculation that US retail sales rose further in August after climbing 0.4% in the previous month added to the sentiment, sending equities in Asia and Europe as well as stock index futures in the US up.
October Brent Crude improved to US$78.45/barrel, while US light, sweet crude for October delivery advanced to US$77.23/barrel.
Blue chip oil and gas producers were on the rise today. Supermajors BP (LON:BP) and Shell (LON:RDSB) advanced 1.3% and 1.45%, while BG Group (LON:BG) added 1.1% and Tullow Oil (LON:TLW) climbed 1%.
Cairn Energy (LON:CNE) posted a small gain.
Engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) stood just above the opening level.
Premier Oil (LON:PMO) led the midcaps with a 2.4% advance. Soco International (LON:SIA) and Dragon Oil (LON:DGO) followed, climbing 1.3% and 1% respectively. Heritage Oil (LON:HOIL) and JKX Oil & Gas (LON:JKX) tacked on less than 1%, while Dana Petroleum (LON:DNX) was flat.
Salamander Energy (LON:SMDR) and Melrose Resources (LON:MRS) went against the tide, shedding 1.9% and 1.1% respectively.
Oil and gas engineering firm Wood Group (LON:WG) did well, tacking on 2%.
US focused explorer and producer Caza Oil & Gas (LON:CAZA) was among the leading performers in the sector with a 7.5% gain.
East and Central Africa focused oil and gas explorer Dominion Petroleum (LON:DPL) and Iraq focused exploration company Petrel Resources (LON:PET) climbed 4%.
Gold stays above $1,240
Gold prices were moving within a narrow range on Monday, sliding just below US$1,245/oz after failing to capture the US$1,250/oz level at the end of last week.
The yellow metal is still resisting the pressure from rising stock markets and concerns that there isn’t enough support for the asset to rise further.
The committee passed the Basel III banking reforms, introducing a capital ratio requirement of 4.5%, while also placing certain restrictions on banks with a ratio of less than 7% to curb the risk of another financial meltdown. Banks have been given until 2019 to comply with the regulations, while a shorter time frame was expected.
Gold is seen as a safe haven asset and usually moves inversely to equities. The continuing upward movement in stock markets has prompted investors to turn to riskier assets, yet gold is still holding on due to a decline in the US dollar, which is seen as an alternative safety option.
In other news, Bloomberg reported that India’s largest jewellery retailer Titan Industries is expecting to see the slowest increase in sales in five years for the 12 months to June due to record high gold prices.
Gold slid to US$1,244/oz, while silver and platinum moved in the opposite direction, rising to US$19.92/oz and US$1,547/oz respectively.
Gold producer Randgold Resources (LON:RRS) was unmoved, while most other major mining stocks rose.
African Barrick Gold (LON:ABG) posted a small gain, while platinum miner Lonmin (LON:LMI) and silver miner Fresnillo (LON:FRES) advanced 2.6% and 1.3% respectively.
Specialty chemicals firm Johnson Matthey (LON:JMAT) stood just above the opening level.
Aquarius Platinum (LON:AQP) surged 3.3%. Other midcaps also did well with gold miner Petropavlovsk (LON:POG) added 1.7% and silver producer Hochschild Mining (LON:HOC) rising marginally.
Turkey and Saudi Arabia focused exploration company KEFI Minerals (LON:KEFI) was among the top risers in the sector with a 16% rally. Zambia focused coloured gemstone company Gemfields (LON:GEM) and gold and high-value base metals focused explorer and developer Stratex International (LON:STX) climbed 10%. West Africa operating diamond production and development company Stellar Diamonds (LON:STEL) followed with a 9% gain.
Australia operating mining exploration company GGG Resources (LON:GGG) advanced 8%.
Investment holding company with a focus on potentially large or high value gold and copper-gold prospects in South America, Mariana Resources (LON:MARL), and junior gold exploration company Solomon Gold (LON:SOLG) joined the party, surging 7% and 6% respectively.
Miners climb as base metals rise
Copper and nickel rose to US$3.46/lb and US$10.51/lb, while zinc improved to US$0.978/lb.
Kazakhmys (LON:KAZ) led the way with a 3.5% climb. Xstrata (LON:XTA) followed with a 2.6% gain. Anglo American (LON:AAL), Antofagasta (LON:ANTO) and Vedanta Resources (LON:VED) rose 2.3%. Eurasian Natural Resources (LON:ENRC) and Rio Tinto (LON:RIO) tacked on nearly 2%. The world’s largest miner BHP Billiton (LON:BLT) rose 1.3%.
Swiss-headquartered resources company with assets in Ukraine Ferrexpo (LON:FXPO) added less than 1%.
AIM-listed Herencia Resources (LON:HER), which develops the Paguanta zinc-lead-silver-gold Project in northern Chile, led the juniors with a 20% rally. Coal miner with a focus on Indonesia Churchill Mining (LON:CHL) followed the majors, climbing 6.5%.
Banks, insurance, private equity
Part-nationalised Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) led the banking stocks with gains of 3.5% and 2.8% respectively. HSBC (LON:HSBA) climbed 2.3%. Barclays (LON:BARC) advanced 1.2% and Standard Chartered (LON:STAN) rose marginally.
Prudential (LON:PRU) was the top riser in the insurance sector, rising 3.5%. Legal & General (LON:LGEN) tacked on 2.6%, Aviva (LON:AV) rose 1.6% and Standard Life (LON:SL) climbed 1.2%, as did Old Mutual (LON:OML).
Admiral Group (LON:ADM) posted a small gain, while RSA Insurance Group (LON:RSA) bucked the trend, shedding 0.5%.
Private equity group 3i (LON:III) moved up 1.6%.
Small Cap Movers
Other notable movers among the small cap included oil and gas production and exploration company with upstream interests in the Gulf of Mexico, Mauritania and the Kurdistan Region of Iraq Sterling Energy (LON:SEY) with a 15% surge.
African Medical Investments (LON:AMEI) and Amphion Innovations (LON:AMP) gained 5%.
Small Cap News
Oxford Nutrascience (LON:ONG) revealed this morning that it is licensing out its Chewitab technology to DCC Health & Beauty Solutions. The agreement is open ended and non-exclusive, the company said in an announcement to the stock exchange.
Retail phenomenon The White Company is taking software from smartFOCUS (LON: STF) to increase customer insight and improve the flexibility of its marketing campaigns. Financial terms of the deal were not disclosed.
Argos Resources (LON:ARG) has reported a a first half of "significant progress" as it bids to prove up potential reserves in the North Falklands Basin. The company owns 100 per cent of the PL001 Licence right next to the Rockhopper Exploration's (LON:RKH) Sea Lion discovery, which could eventually turn out to be a world class oil find. The group says seismic data reprocessing has been completed with a "noticeable improvement in quality".
Noventa (LON:NVTA) today reflected on the “considerable and positive progress” made during the first half of the year following the widely anticipated recommencement of production from its main tantalum asset in Mozambique.
Singer Capital Markets issued an upbeat note on Advanced Computer Software Group PLC (LON:ASW), following the on healthcare and commercial sector-focused IT group’s trading update ahead of interim results.
Nyota Minerals (LON:NYO, ASX:NYO) announced that its chief operating officer Terry Tucker is moving into the chief executive role with immediate effect. Melissa Sturgess, currently CEO and chairman, relinquishes her CEO role and will remain chairman, focused on strategy, shareholder relations and government relations for the Company's Ethiopian gold interests.
After unprecedented levels of activity resulted in “outstanding progress” during the first half, Gulf Keystone Petroleum (LON:GKP) is anticipating further success in Kurdistan in 2010 with a cash balance ten times greater than a year ago.
Large and Mid Cap News
Advertising and marketing giant WPP PLC (LON:WPP) said its its wholly-owned operating company G2, the global brand activation agency network and a Grey Group company, announced today that it has agreed to acquire a majority stake in Chinese shopper-marketing consultancy DPI. Financial details were not disclosed.
Tullow Oil (LON:TLW) said the Owo-1 exploration sidetrack in the Deepwater Tano licence offshore Ghana has significantly extended the column of high quality light oil discovered by the Owo-1 well. Results of drilling, wireline logs and samples of reservoir fluids confirm that Owo is a major new oil field.
Coal of Africa’s (LON:CZA) farm swap agreement with Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO) moved a step closer as regulators in South Africa gave the deal the green light. The approval from the Department of Mineral Resources Coal relates to the Makhado coking Coal Project and was granted under section 102 of the Minerals and Petroleum Resources Development Act.
Gold miner Centamin Egypt (LON:CEY, TSX:CEE) has cut its production guidance for the current year, while also anticipating higher cash costs per ounce in the current quarter.