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FTSE 100 recovers after Dow Jones, S&P 500 and NASDAQ rally in early trade

7th Jul 2010, 4:02 pm FTSE 100 recovers after Dow Jones, S&P 500 and NASDAQ rally in early trade

Overview: the FTSE 100 turned early losses into gains today, standing 0.6% above the opening level in late afternoon, boosted by a positive start on Wall Street and strong performance from financial stocks and battered energy supergiant BP.

BP (LON:BP) emerged atop the leaderboard with a 5% advance. Retailer Sainsbury’s (LON:SBRY) was close with a 4.7% climb, while bank Barclays (LON:BARC) and telecom company BT (LON:BT.A) added more than 3%. Power generation company International Power (LON:IPR) rose 3%,. Energy company Centrica (LON:CNA) and commercial peoperty company Land Securities (LON:LAND) tacked on nearly 2.5%.

Miner ENRC (LON:ENRC) and retailer Marks & Spencer (LON:MKS) were at the bottom of the pile with losses of about 2.5%. Other notable fallers included hospitality company Whitbread (LON:WTB), fashion house Burberry (LON:BRBY) and asset management firm Schroders (LON:SDR), which shed almost 2%.

US shares rallied in early trade. The Dow Jones Industrial Average surged 1.45%, the broader S&P 500 index jumped 1.55% and the technology heavy NASDAQ composite advanced 1.5%.

Commodities

Oil prices got closer to Tuesday’s levels this morning after surrendering most of their gains following a selloff in Asian and European markets, while US shares retreated on a bearish update on the growth in the services sector. ISM (Institute of Supply Management) reported a decline to 53.8 in June from 55.4 in May, showing the slowest expansion of non-manufacturing activity since February.

Traders will now be looking to the inventories reports from the American Petroleum Institute (API) and Energy Information Administration (EIA), which will be released today and tomorrow respectively. Both reports showed declines in oil stockpiles in the US, suggesting higher demand in the world’s leading energy consumer.

August Brent Crude climbed to US$72/barrel, while US light, sweet crude for August delivery advanced to US$72.36/barrel.

Blue chip oil and gas producers were mixed today. BP (LON:BP) outperformed its peers, rallying 4%, while fellow supermajor Shell (LON:RDSB) and Tullow Oil (LON:TLW) posted marginal losses. BG Group (LON:BG) and Cairn Energy (LON:CNE) added less than 1%.

Oil and gas engineering firms headed in different directions as while Petrofac (LON:PFC) posted a small gain, Amec (LON:AMEC) was sitting just below the opening level.

Midcaps were mixed. Dana Petroleum (LON:DNX) was at the bottom of the pile with a loss of 3.2%. Melrose Resources (LON:MRS) followed, declining 1.2%.

JKX Oil & Gas (LON:JKX) was in the lead with a 3.7% advance, while Heritage Oil (LON:HOIL) and Tullow Oil (LON:TLW) followed with gains of about 2%. Dragon Oil (LON:DGO) added less than 1%.

Premier Oil (LON:PMO) and Salamander Energy (LON:SMDR) were unmoved.

Services companies were in demand with Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) rising 1.3% and 2.5% respectively.

Energy investor Xtract Energy PLC (LON:XTR) and Mongolia-focused Petro Matad Ltd (LON:MATD) were among the top performers in the sector, surging 13% and 11%. Ukraine focused gas producer, Regal Petroleum (LON:RPT) and US focused oil and gas junior Caza Oil & Gas (LON:CAZA) also did well, climbing 5.5% and 5% respectively.

Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LON:GOO) and Iraq operating Irish oil company Petrel Resources (LON:PET) headed in the opposite direction, shedding more than 7%.

Gold slips below $1,200

Despite falls in global stock markets, the safe-haven gold suffered heavy losses, slipping below the key US$1,200/oz level after China reiterated it would not rely on gold as a strategic investment.

China’s State Administration of Foreign Exchange said the risk return balance of gold had not been good over the past 30 years, the prices were volatile and gold investment did not generate investment returns. Overall, China’s comments suggested a negative long term outlook with plenty of risks in play, including the impact of currencies, geopolitical factors and speculation on the prices.

Gold settled at US$1,192/oz by late afternoon. Silver and platinum fell to US$17.75/oz and US$1,510/oz respectively.

Major mining stocks were mixed today. Randgold Resources (LON:RRS) added nearly 1%, while silver miner Fresnillo (LON:FRES) climbed 1.6% and platinum producer Lonmin (LON:LMI) declined 2.2%.

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

All midcaps were in the red. Aquarius Platinum (LON:AQP) led the retreat, sliding 6%. Silver producer Hochschild Mining (LON:HOC) and gold miner Petropavlovsk (LON:POG) posted marginal losses.

Commodity asset development company Mercator Gold (LON:MCR) was one of the top performing stocks among the juniors with a 6% gain. London listed Australian gold producer Leyshon Resources (LON:LRL) slipped 6.5%.

Base metals rise, but miners decline

Base metals were on the rise today. Copper and nickel improved to US$2.98/lb and US$8.61/lb, while zinc advanced to US$0.81/lb.

Despite higher prices, major mining stocks were in decline today. Eurasian Natural Resources (LON:ENRC) and Kazakhmys (LON:KAZ) slid 2.5% and 2.1% respectively. Vedanta Resources (LON:VED) added 1.8%, while Rio Tinto (LON:RIO) climbed 1.6% and Xstrata (LON:XTA) tacked on 1.1%, as did Antofagasta (LON:ANTO). Anglo American (LON:AAL) and BHP Billiton (LON:BLT) posted small gains.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, shedding 1%.

Most juniors followed the trends. South Africa based coal exploration and production company Strategic Natural Resources (AIM: SNR) and Australia focused coking coal producer Caledon Resources (AIM: CDN) slipped 7% and 6.5% respectively. Finders Resources (LON:FIND) lost 5.7%.

Banks, insurance, private equity

Barclays (LON:BARC) advanced 3% to take the lead in the banking sector. Royal Bank of Scotland (LON:RBS) was close with a 2.7% gain, while Standard Chartered (LON:STAN) moved up 1.1% and Lloyds (LON:LLOY) added less than 1%.

HSBC (LON:HSBA) went against the tide, shedding 1.2%.

Insurance companies were mixed. Aviva (LON:AV) and Prudential (LON:PRU) posted marginal losses. Old Mutual (LON:OML), RSA Insurance Group (LON:RSA) and Standard Life (LON:SL) posted small gains. Legal & General (LON:LGEN) and Admiral Group (LON:ADM) advanced 1.8% and 1.1% respectively.

Private equity group 3i (LON:III) rose 2.7% after updating investors on its performance today.

Small Cap Movers

Other notable movers among the small caps included African focussed soft commodity specialist, Agriterra Limited (AIM: AGTA) with a 7.5% decline, bio-pharmaceutical group Lipoxen (LON:LPX), which lost 5%, and African focused investor Lonrho (LON:LONR) with a 5% gain. Offshore marine renewables development company SeaEnergy (LON:SEA) and mobile email and data synchronisation group Synchronica PLC (AIM: SYNC) led the small caps, rallying 24% and 20% respectively.

Small Cap News

DiamondCorp (LON:DCP, JSE:DMC) has announced a massive increase to the size of the J-12 exploration target in Borswana from 15 hectares (ha) to 45ha, following the reprocessing of geophysical data from the PL71 Prospecting Licence, which covers the Jwaneng South project area. The company said that it has also better defined a 4ha target at J-05.

Amur Minerals Corp (LON:AMC) has applied for a two-year extension to its exploration rights on the Kun-Manie licence in far east Russia. Concurrently, the company reiterated that it is awaiting a decision from the Russian authorities, on its mining application for Kun-Manie, which was submitted in January 2010.

SeaEnergy’s (LON:SEA) 80%-owned subsidiary SeaEnergy Renewables (SERL) has signed a Strategic Cooperation Agreement (SCA) with state-backed Chinese group Nantong COSCO Ship Steel Structure Co Ltd (NCSC) to develop and market steel structures for the offshore wind industry.

Nighthawk Energy (LON:HAWK, OTC:NHEGY) said that a report on the continuity of the Atoka and Cherokee shales over key areas of its Jolly Ranch project by Schlumberger Data & Consulting Services provides confidence that shales were present under most, if not all of the Jolly Ranch project acreage.

Aurelian Oil & Gas (LON:AUL) has selected the site for its first high-impact well on the Carpathian Thrust Fold Belt on the Bieszczady block in Poland. The well, which is the first of three, is targeting up to 100 million barrels of oil.

Niche engineering and manufacturing company Specialist Energy Group (LON:SEGR) has appointed former senior adviser to the Bank of England and the FSA (Financial Services Authority) Victor Emerson as non-executive director and chairman of the remuneration committee.

Privately owned, UK-registered mining group Swala Resources has agreed a deal with its JV partner in Burkina Faso, SearchGold Resources (TSX-V:RSG, FSE:S1O), to acquire the remaining 60% of the Arae-Gassel gold project. The companies have been jointly exploring the property following a JV agreement in May 2009, which was later revised to allow Swala to earn-a 40% interest in the property.

Kenmare Resources (LON:KMR) has announced its plans to change the classification of its ‘dual-listed’ equities, with its Irish Stock Exchange (ISE) listing becoming a secondary listing, and in London the equities will trade under a LSE Premium Listing (formerly referred to as a primary listing).

Finders Resources (ASX, LON:FND) has updated progress at the Wetar Copper Project on Wetar Island, Maluku Barat Daya in eastern Indonesia, with a Demonstration Plant and associated heap leaching facilities currently producing some 5 tonnes per day of high quality cathode copper.

Large and Mid Cap News

Oil and gas producer Tullow Oil (LON:TLW) has announced that the government of Uganda has approved its acquisition of the 50% interest in Blocks 1 and 3A in Uganda belonging to sector peer Heritage Oil (LON:HOIL).

DS Smith (LON:SMDA) has reached a binding agreement to acquire French corrugated packaging company, The Otor Group, for €247m (£206m) from private equity group Carlyle. The company believes that the acquisition satisfies a number of its key strategic objectives, to develop a strong continental European corrugated packaging business in theFast Moving Consumer Goods’ (FMCG) sector, and to significantly strengthen the company’s French presence.

Anglo-Swiss miner Xstrata (LON:XTA) has decided to invest US$1.47 billion into the development of he Antapaccay copper project as a major long-life, low cost brownfield expansion to the Tintaya copper mine in southern Peru.

Private equity group 3i (LON:III) said today that the business continues to perform well despite uncertain markets, and that it is seeing stable to improving earnings performance across the portfolio and a good pipeline of investment opportunities.

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