Overview: the FTSE 100 pared gains in late afternoon after gaining nearly 1% early in the session as investors cheered yesterday’s bullish update on US jobless claims.
In other news, US consumer prices added 0.3% in August after rising by as much in July.
Temporary power provider Aggreko (LON:AGK) led the FTSE 100 with a gain of nearly 4%. Engineering firm Invensys (LON:ISYS) followed with a 3.3% gain, while telecom company Cable & Wireless Worldwide (LON:CW) and fashion house Burberry (LON:BRBY) advanced 2.5% and 2% respectively.
Banking group Barclays (LON:BARC) and hedge fund manager Man Group (LON:EMG) were at the bottom of the pile with losses of over 2.5%. Satellite telecommunications company Inmarsat (LON:ISAT) and pharmaceutical company Shire (LON:SHP) lost nearly 2% each. Home Retail Group (LON:HOME) and water company Severn Trent (LON:SVT) lost just over 1%.
US stocks were off to a positive start. The Dow Jones Industrial Average and the broader S&P 500 index added 0.5%, while the technology heavy NASDAQ composite moved up 0.65%.
Commodities
Today’s early rally in stock markets lifted oil prices, driving US crude futures to nearly US$80/barrel.
The UK’s FTSE 100 rose 0.8%, while futures for the Dow Jones Industrial Average in the US climbed 0.7% in a late response to yesterday’s update on US jobless claims. The US Labor Department reported a surprising drop of 3,000 in initial jobless claims, which now stand at 450,000.
The four week moving average, which is seen as a less volatile estimate, dropped 13,000 to 464,750.
Oil prices usually follow share price movements in stock markets, which serve as an indicator of the strength of the economy, impacting the outlook for energy demand.
This week’s inventories reports provided support for oil prices, with the data from the US Energy Department showing an unexpected drawdown of 2.5 million barrels. On Tuesday, the American Petroleum Institute (API) said that crude stockpiles gains 3.3 million barrels last week, raising concerns about the demand in the world’s largest energy consumer.
A decline in the US dollar provided more support for the prices. The American currency weakened against the euro with the EUR/USD rate rising to 1.313 after Spain conducted a successful debt auction.
This proved to be enough to turn away the pressure form the anticipated restart of the Line A6 oil pipeline, which was drained and shut down earlier this week to disrupt shipments of Canadian oil to US refineries.
October Brent Crude rose to US$79.28/barrel, while US light, sweet crude for October delivery climbed to US$75.14/barrel.
Blue chip oil and gas producers didn’t move by much. Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW) were flat, as was BP (LON:BP), while fellow supermajors Shell (LON:RDSB) added less than 1%.
BG Group (LON:BG) climbed 1%.
Amec (LON:AMEC) rose marginally, while another oil and gas engineering firm, Petrofac (LON:PFC), advanced 1.5%.
Midcaps were mixed. Dragon Oil (LON:DGO) was the best performer with a 1.5% gain. Dana Petroleum (LON:DNX) tacked on less than 1%.
JKX Oil & Gas (LON:JKX), Melrose Resources (LON:MRS) and Premier Oil (LON:PMO) posted small losses, while Salamander Energy (LON:SMDR) and Soco International (LON:SIA) declined 1.5% and Heritage Oil (LON:HOIL) lost 2%.
Services company Wood Group (LON:WG) rose 1.3%.
North Sea explorers Xcite Energy (LON:XEL) was among the top performing small caps with a 7.5% advance.
Gold eclipses $1,280
Gold retreated after setting fresh record highs at over US$1,282/oz, getting more help from a decline in US dollar and rising on inflation fears yesterday.
On Thursday it was reported that US producer prices increased 0.4% in August, which was the biggest gain in five months and double July’s rise of 0.2%. The update increased gold’s appeal as an inflation hedge, while the US dollar, which is seen as an alternative investment, continued declining against the euro.
The EUR/USD rate reached 1.313 after Spain undertook a successful bond auction, easing worries over the country’s fiscal situation.
Gold stood at US$1,276/oz, while silver and platinum climbed to US$20.88/oz and US$1,622/oz respectively.
Major mining stocks were mixed. Gold miner Randgold Resources (LON:RRS) and platinum producer Lonmin (LON:LMI) added nearly 1%, while silver miner Fresnillo (LON:FRES) declined marginally, as did African Barrick Gold (LON:ABG).
Specialty chemicals firm Johnson Matthey (LON:JMAT) was flat.
Silver producer Hochschild Mining (LON:HOC) led the midcaps with a 1.6% gain. Aquarius Platinum (LON:AQP) and gold producer Petropavlovsk (LON:POG) declined 1%.
Australia operating mining exploration company GGG Resources (LON:GGG) emerged among the top risers in the sector with an 11.5% rally. Gold and high value base metal focused exploration and development company Stratex International (LON:STI) also did well, tacking on 6%.
Base metals rise to boost miners
Copper and nickel were on the rise, reaching US$3.52/lb and US$10.61/lb, while zinc advanced to US$0.984/lb.
Base metal miners advanced. Kazakhmys (LON:KAZ) surged 2.6%, while Antofagasta (LON:ANTO) and Vednta Resources (LON:VED) followed with gains of 2%. Xstrata (LON:XTA) climbed 1.6% and Eurasian Natural Resources (LON:ENRC) added 1%, as did Anglo American (LON:AAL) and Rio Tinto (LON:RIO).
The world’s largest miner BHP Billiton (LON:BLT) bucked the trend, sliding just below the opening level.
Swiss-headquartered resources company with assets in Ukraine Ferrexpo (LON:FXPO) moved with the sector, rising 2.2%.
Mineral exploration company focused on gold and uranium, Red Rock Resources (LON:RRR) led the juniors with a 18.5% rally. Australia operating coking coal producer and explorer Caledon Resources (LON:CDN) followed, surging 9%. Africa focused explorer of zinc, lead, barite and fluorite deposits Maghreb Minerals (LON:MMS) and Turkey, the Philippines and Albania operating miner European Nickel (LON:ENK) advanced 7% and 6% respectively.
Banks, insurance, private equity
Barclays (LON:BARC) led the banking stocks with a 2.5% advance. HSBC (LON:HSBA), Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) declined marginally.
Standard Chartered (LON:STAN) stood just above the opening level.
Admiral Group (LON:ADM) was the top performing insurer with a 1.3% gain. Aviva (LON:AV), RSA Insurance Group (LON:RSA) and Standard Life (LON:SL) added less than 1%.
Legal & General (LON:LGEN), Old Mutual (LON:OML) and Prudential (LON:PRU) moved in the opposite direction, posting small declines.
Private equity group 3i (LON:III) lost nearly 1%.
Small Cap News
Herencia Resources (LON:HER) this morning reported a significant increase in the tonnage, grade and metal content of the resource at its Paguanta project in Chile. Also, for the first time, Herencia included a gold grade estimation to provide possible revenue credit.
Thor Mining (ASX: THR) has responded to an ASX price and volume query regarding today's intra-day share spike to $0.022, up from a close of $0.013 on Tuesday 14 September, saying the company is not aware of any information that has not been announced to the market which could have an impact on the share price.
Persian Gold (LON:PNG) is actively preparing to go ahead with the previously announced major strategic shift, which will see the company diversifying into oil and gas, shifting its geographical focus from Iran and changing its name.
Noventa (LON:NVTA) has placed a further 9.7 million shares to raise £0.64 million on top of the more than £5 million it secured earlier this month. The placing price of 6.5 pence isn’t far off the stock’s closing price yesterday of 6.76 pence.
Synchronica (LON:SYNC) is rapidly moving toward closing the acquisition of Canadian mobile email competitor iseemedia, of which it already owns 74%. Synchronica two days ago extended its offer until 24 September, giving itself more time to acquire at least 90% of the company.
Investors in Caledon Resources (LON:CDN, ASX:CCD) have been in for a rollercoaster ride this year, and the Australian coking coal producer is not letting them off just yet: it announced another approach for the group this morning, sending the shares up 15 percent.
Edison Investment Research has issued a bullish note on Helius Energy (LON:HEGY), saying that as the UK’s only pure biomass generator, the company could capitalise on the significant demand for renewable energy. As per the research house’s estimates, the share price could be three times the current 25 pence, which at the moment gives it a market cap of £22 million.
Large and Mid Cap News
Private equity group 3i Group PLC (LON:III) announced it is combining its Growth Capital business, which acquires small stakes in companies, with the Buyout business to form one Private Equity business. This will mean that 3i has two distinct business lines, Infrastructure and Private Equity. As discussed at the year-end, 3i also continues to explore expansion into adjacent areas such as debt management.
Invensys PLC (LON:ISYS) said its train control and signalling business Invensys Rail has entered into significant agreements with a division of CSR Corporation Ltd (CSR), a Chinese manufacturer of rolling stock.