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FTSE 100 turns negative as BP slips 5%, US stocks decline in early trade

19th Jul 2010, 4:01 pm FTSE 100 turns negative as BP slips 5%, US stocks decline in early trade

Overview: the FTSE 100 turned negative late in the session as BP’s losses outweighed gains made by International Power (LON:IPR), which reopened merger talks with GDF Suez of France, as well as banks and base metal miners.

International Power (LON:IPR) emerged atop the leaderboard with an 11% gain. Engineering firm Invensys (LON:ISYS), bank Standard Chartered (LON:STAN) and miner Rio Tinto (LON:RIO) followed, climbing 3.1%, 2.2% and 1.2% respectively.

Oil and gas supermajor BP (LON:BP) was at the bottom of the pile with a 5% decline. Associated British Foods (LON:ABF) and software developer Autonomy Corporation (LON:AU) followed, sliding 2.7% and 2% respectively. Cruise operator Carnival Corp (LON:CCL), hospitality company Whitbread (LON:WTB) and telecom group Cable & Wireless Worldwide (LON:CW) declined 1.7%.

Contrary to pre-trade projections, US markets opened the session with losses. The Dow Jones Industrial Average slid 0.2%. The broader S&P 500 index lost 0.25% and the technology heavy NASDAQ composite moved down 0.3%.

Commodities

Oil prices were little moved as commodity markets

were still pressured by last week’s bearish economic updates that suggested a slower pace of recovery to muddy the outlook for crude demand, also offsetting positive inventories reports.

The prices were supported by Wednesday’s inventories report from Energy Information Administration (EIA), which said that crude stockpiles in the US shed 5.1 million barrels, signalling an increase in demand in the world’s largest energy consumer. Back on Tuesday, the American Petroleum Institute (API) said that inventories added 1.7 million barrels.

US light, sweet crude for August delivery was unchanged at US$76/barrel today.

BP (LON:BP) was the only blue chip oil and gas producer to decline today, shedding more than 4% after it was reported that oil was still leaking from the ruptured well in the Gulf of Mexico. Fellow supermajpr Shell (LON:RDSB) posted a small gain, as did Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW). BG Group (LON:BG) did better, climbing 1.4%.

Oil and gas engineering companies Amec (LON:AMEC) and Petrofac (LON:PFC) stood just above the opening level.

Midcaps were mixed. Premier Oil (LON:PMO) was in the lead with a 2.5% advance. Dragon Oil (LON:DGO) added 1.6% and Soco International (LON:SIA) posted a small gain. Dana Petroleum (LON:DNX), Heritage Oil (LON:HOIL) and Salamander Energy (LON:SMDR) shed less than 1%, while JKX Oil & Gas (LON:JKX) and Melrose Resources (LON:MRS) lost almost 2%.

Services companies headed in opposite directions as while Wood Group (LON:WG) tacked on 1.2%, Wellstream Holdings (LON:WSM) declined 2%.

US focused oil and gas junior Caza Oil & Gas (LON:CAZA) soared 25% to lead the small caps. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LON:GOO) and EU operating Rome-based oil junior Mediterranean Oil & Gas (LON:MOG) gained more than 10%.

Mongolia-focused Petro Matad Ltd (LON:MATD) slipped 7.5%.

Gold slips below $1,190

Gold prices declined despite today’s decision by credit ratings agency Moody’s to cut Ireland’s sovereign rating by one notch to Aa2 ahead of tomorrow’s bond auction. Concerns over the debt situation in euro zone states, primarily Greece, Spain and Portugal, have been the main driver behind the safe haven buying that fuelled gold’s surge that has propelled it to new record lows this year.

Investors are now actively dumping bullion on concerns that it has been oversold and there is not enough support for the current price level to be sustainable in the long run. According to US Commodity Futures Trading

Commission data, hedge funds lowered their long positions on gold to 2% last week, which is the lowest level since April.

Gold slipped to US$1,188/oz, while silver and platinum declined to US$17.80/oz and US$1,507/oz respectively.

Major mining stocks didn’t move by much today. Randgold Resources (LON:RRS) and platinum miner Lonmin (LON:LMI) posted small gains, while silver miner Fresnillo (LON:FRES) was flat.

African Barrick Gold (LON:ABG) climbed 1%.

Specialty chemicals firm Johnson Matthey (LON:JMAT) declined 1.25%.

Aquarius Platinum (LON:AQP) tumbled 13% after South Africa imposed new safety restrictions on mines. Silver producer Hochschild Mining (LON:HOC) added almost 1%, while gold miner Petropavlovsk (LON:POG) posted a small loss.

Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) moved with the sector, sliding 7.5%. South Africa and Botswana operating diamond miner Firestone Diamonds (LON:FDI) and Africa operating gold and platinum miner Goldplat (LON:GDP) followed, shedding more than 5%.

Base metals rise to bolster miners

Copper and nickel climbed to US$2.96/lb and US$8.47/lb, while zinc rose to US$0.81/lb.

Mining stocks were in demand today. Xstrata (LON:XTA) took the lead in the sector with a 2.5% gain. Rio Tinto (LON:RIO) was close, climbing 2.3%. Antofagasta (LON:ANTO) and Vedanta Resources (LON:VED) added 1.7%, while Anglo American (LON:AAL) and BHP Billiton (LON:BLT) advanced 1.4%. Eurasian Natural Resources (LON:ENRC) and Kazakhmys (LON:KAZ) posted small gains.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) added less than 1%.

South Africa operating chrome miner Chromex Mining (LON:CHX) and Indonesia operating coal miner Churchill Mining (LON:CHL) led the juniors, rallying 9% and 8% respectively.

Forte Energy (LON:FTE) slipped 15%. Australia focused coking coal producer Caledon Resources (LON:CDN) and Specialty minerals exploration and development company Thor Mining (LON:THR) declined 6.5% and 5.5% respectively.

Banks, insurance, private equity

Banking stocks were on the rise today. Standard Chartered (LON:STAN) was the best performer in the sector with a 2.7% gain. Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS) climbed 1.5%. HSBC (LON:HSBA) added nearly 1% and Lloyds (LON:LLOY) posted a small gain.

Legal & General (LON:LGEN) was just above the opening level, while Admiral Group (LON:ADM) was unmoved. Aviva (LON:AV), Old Mutual (LON:OML), RSA Insurance Group (LON:RSA) and Standard Life (LON:SL) posted small losses. Prudential (LON:PRU) slipped 1.5%.

Private equity group 3i (LON:III) was flat.

Small Cap News

Forte Energy (ASX:FTE, LON:FTE) has reported a maiden high-grade JORC Code compliant mineral resource estimate for its 100%-owned Bir En Nar Uranium Project, located in Mauritania, West Africa.

Central China Goldfields (LON:GGG) (GGG) has raised £1.125m in an institutional placing, issuing 29.6m shares at 3.8p each. The funds raised, along with the proceeds from the sale of the group's sChinese assets will provide the company with a cash resource over £3m, enough to fast-track the company’s principal asset - the Bullabulling gold project in Western Australia.

Iraq and Algeria operating Gulf Keystone Petroleum (LON:GKP) has said that the initial loads of production facility equipment to the Shaikan field location have arrived and that the AOS Discoverer-1 drilling rig has commenced the rig move to the Sheikh Adi-1 exploration well site.

Access Intelligence, the computer software firm chaired by former Sage boss Michael Jackson, revealed a bumper 180 per cent jump in first half profits, but warned of a "tightening of the public sector purse" ahead of some fairly savage austerity measures.

TyraTech Inc (LON:TYR) announced plans to establish a second, unrestricted, trading line on London Stock Exchange’s AIM market. The new unrestricted listing (LON:TRYU) will stand alongside the existing ‘REG S’ stock, and it is expected to make the company’s equity more attractive to investors, and trade with improved liquidity.

Ceramic Fuel Cells Limited (LON:CFU) has chosen Australian retailer Harvey Norman to distribute its BlueGen gas-to-electricity generators through the Harvey Norman commercial division franchisee.

Clinical decision support systems developer and provider Avia Health Informatics’ (LON:AVIA) subsidiary Plain Healthcare has launched the first product in the Odyssey MobileAssess range as part of its international growth strategy.

ZincOx Resources’ (LON:ZOX) plans to develop an EAFD (electric arc furnace dust) zinc recycling facility in Korea has taken a significant step forward. The company told investors that the land selected for the Korea recycling plant (KRP) has now been purchased by the Korean authorities, with the sole intention of leasing it to ZincOx.

In a note on Leni Gas & Oil (LON:LGO) (‘LGO’), Edison Investment Research said that the company has the potential to transform itself into a mid-tier exploration and production (E&P) company over the next two or three years.

In an analyst note entitled “Copper-bottomed”, London-based stockbroker Daniel Stewart & Co said that Metminco (LON:MNC, ASX:MNC) provides investors with “an excellent opportunity” to get involved in a company with strong growth prospects, underpinned by the positive copper outlook, and with “little downside risk”.

Baobab Resources (LON:BAO) has agreed a new joint venture with Southern Iron - an unlisted Australia-based southern Africa-focused mineral explorer - to advance  Baobab’s Changara base metal and manganese project, in Mozambique. Through the staged joint venture agreement, Southern Iron can earn up to 80% in the project by undertaking a Definitive Feasibility Study within five years.

Large and Mid Cap News

Advertising major WPP PLC (LON:WPP) said its digital investment arm WPP Digital has acquired a minority stake in Leading Smart Holdings Limited, a BVI company, which has a controlling interest in the parent company of Moment Systems, a digital advertising measurement company in China.

Engineering company Tomkins (LON:TOMK) has confirmed a takeover approach from a consortium comprising the Onex Corporation and the Canada Pension Plan

Investment Board, which has offered 325 pence per share, valuing the company at £2.9 billion.

Retailer and FTSE 250 constituent Debenhams (LON:DEB) has signed a new £650 million credit facility to complete the refinancing of its borrowing facilities.

Shares in London-headquartered electricity generator International Power (LON:IPR) (IPR) jumped over 10% on the main market of the London Stock Exchange (LSE) today, as the company confirmed that talks are back on to consolidate its business with GDF Suez Energy’s (EPA:GSZ) international assets.

In its H1 results, SThree (LON:STHR) told investors that whilst its markets are “still some way from being fully recovered”, the company’s performance in the first half of 2010 was “very creditable”. The specialist recruiter reported a 20% decline in year-on-year gross profit to £74.3m (2H109:£93.3m).

Food manufacturer Unilever (LON:ULVR) gas agreed to sell its Italian frozen foods

business Findus for €805 million to a company controlled by Birds Eye Iglo, which will now own the 4 Salti in Padella, Sofficini, Capitan Findus and That's Amore brands and a dedicated factory in Cisterna, Italy.

British engineering giant Rolls-Royce (LON:RR) has won two new contracts totaling US$750m, with a large deal to supply Russia's national airline, Aeroflot with 24 Trent engines and a share in revenue from a deal between the International Aero Engines consortium (IAE) with Yemen Airways (Yemenia).

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