FTSE 100 declines as Dow Jones and S&P 500 futures slide ahead of Fed's Beige Book
Overview: the FTSE 100 erased Tuesday’s gain with a 0.3% decline today ahead of the Fed’s Beige Book survey of regional economic conditions, which will be released later today.
Insurer Prudential (LON:PRU), Anglo Swiss miner Xstrata (LON:XTA) and satellite communications company Inmarsat (LON:ISAT) led the blue chips with gains of 1.5%. Other notable risers included asset management firm Schroders (LON:SDR), the world’s largest miner BHP Billiton (LON:BLT) and oil and gas producer Tullow Oil (LON:TLW), which added more than 1%.
Engineering firm Invensys (LON:ISYS) was the heaviest faller with a decline of almost 5%. Scottish & Southern Energy (LON:SSE) and quality and safety services company Intertek (LON:ITRK) followed, shedding 4% each. Packaging group Rexam (LON:REX) dropped 3.5%. Associated British Foods (LON:ABF) lost 3% and tour operator TUI Travel (LON:TT) retreated 2.5%, as did caterer Compass Group (LON:CPG).
The Dow Jones Industrial Average and the broader S&P 500 index are currently projected to open slightly lower.
Commodities
Oil prices were slightly lower today after falling sharply Tuesday night not long after US crude recaptured the US$79/barrel level, tracking gains in equity markets. The FTSE 100 and futures for the Dow Jones and S&P 500 indexes surged yesterday after banks got a boost from the Basel Committee, which said it would loosen up the liquidity and capital rules laid out in its Basel III reform. Banks UBS (NYSE:UBS) and Deutsche Bank (NYSE:DB) reported strong corporate results to provide more support for the sector.
Yesterday’s inventories report from the American Petroleum Institute (API) delivered a further blow to the prices, showing a huge gain of 3.8 million barrels in US stockpiles. Gasoline inventories and distillates, which include diesel and heating oil, added 877,000 barrels and 407,000 barrels respectively.
Goldman Sachs (NYSE:GS) said this week that the current fundamentals could support oil at a much higher price. However, the investment bank cut its forecast for H2 to the lower end of the US$85-95/barrel range, citing high inventories and mixed signals about the strength of the ongoing economic recovery.
September Brent Crude slipped to US$76.10/barrel, while US light, sweet crude for September delivery declined to US$77.34/barrel on the New York Mercantile Exchange (NYMEX).
Blue chip oil and gas producers were in decline today with the exception of Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW), which managed to stay flat. BG Group (LON:BG) declined 2.5%, while BP (LON:BP) dropped 1.5% and fellow supermajor Shell (LON:RDSB) posted a small loss.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) retreated 1.6% and 1.1% respectively.
Midcaps didn’t show much movement. Salamander Energy (LON:SMDR) was an exception, rallying 4% to take the lead in the sector. Soco International (LON:SIA) followed with a 1% gain. Dragon Oil (LON:DGO) and Premier Oil (LON:PMO) declined 1%. JKX Oil & Gas (LON:JKX) and Melrose Resources (LON:MRS) posted small losses.
Heritage Oil (LON:HOIL) was flat.
Services companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) were sitting just below the opening levels.
US focused oil and gas junior Caza Oil & Gas (LON:CAZA) and EU operating Rome-based oil junior Mediterranean Oil & Gas (LON:MOG) led the juniors with gains of 8% and 7.5% respectively. North America focused oil & gas junior Pantheon Resources (LON:PANR) and Iraq and Algeria operating Gulf Keystone Petroleum (LON:GKP) also did well, tacking on 6.5% and 5% respectively.
Iraq operating Irish oil company Petrel Resources (LON:PET) was in decline with a 11% loss. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LON:GOO) declined 5%.
Gold plummets to $1,160
Gold prices plummeted to three month lows at below US$1,160/oz after US home prices were shown to have climbed 4.6% in May to curb safe haven demand, which has been the main driver behind the yellow metal’s strong performance This, coupled with Friday’s results of the stress test revealing that just 7 of 91 European banks failed to show they would withstand another crisis, prompted investors to pour money into riskier assets such as the euro, which hit 11 week highs against the US dollar yesterday at over 1.30.
In another bit of good news, yields on Spanish and Portuguese 10 year bonds declined to 4.16% and 5.39% respectively. Spain has successfully raised €3.4 billion in a debt auction this week with average yields dropping for the first time since March this year.
African Barrick Gold (LON:ABG) released a strong quarterly report yesterday, saying that profit more than doubled in Q2 to US$46.2 million from US$19.7 million. The company was the top performing stock in the sector, while both Randgold Resources (LON:RRS) and Petropavlovsk (LON:POG) were in decline.
Gold last traded at US$1,163/oz today, while silver and platinum declined to US$17.63/oz and US$1,537/oz respectively.
Major mining stocks were in decline. Gold miner Randgold Resources (LON:RRS) and platinum miner Lonmin (LON:LMI) posted small losses, as did silver miner Fresnillo (LON:FRES). African Barrick Gold (LON:ABG) was flat.
Specialty chemicals firm Johnson Matthey (LON:JMAT) shed less than 1%.
Gold miner Petropavlovsk (LON:POG) followed the majors, sliding 1%, while silver producer Hochschild Mining (LON:HOC) posted a small loss.
Aquarius Platinum (LON:AQP) out performed the sector with a 1.8% gain.
UK-registered China operating copper and gold miner Central China Goldfields (LON:GGG) was the top performer among the juniors with a 9% gain.
Base metal miners mixed
Copper and zinc rose to US$3.22/lb and US$0.86/lb respectively. Nickel headed in a different direction, sliding to US$9.24/lb.
Base metal miners were mixed. BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Vedanta Resources (LON:VED) rose 1%, while Anglo American (LON:AAL) followed with a small gain. Xstrata (LON:XTA) was in the lead with a 1.5% climb.
Antofagasta (LON:ANTO) and Eurasian Natural Resources (LON:ENRC) lost 1% and Kazakhmys (LON:KAZ) was sitting just below the opening level.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) declined 2.2%.
South American focused junior miner Herencia Resources (LON:HER) was on of the top performers in the sector with a 7% advance.
Copper and nickel explorer Regency Mines (LON:RGM) slipped 6.5%. Finders Resources (LON:FND) and laterite nickel specialist European Nickel (LON:ENK) followed with losses of over 5%.
Banks, insurance private equity
Banking stocks were on the rise today with the sole exception of part-nationalized bank Lloyds (LON:LLOY), which dropped 2.5%. Barclays (LON:BARC) and HSBC (LON:HSBA) added 1% and 1.2% respectively, while Royal Bank of Scotland (LON:RBS) and Standard Chartered (LON:STAN) posted small gains.
Prudential (LON:PRU) was the top performer among the insurance companies with a 1.7% gain. Sector peer Legal & General (LON:LGEN) was in the black with a small gain.
Standard Life (LON:SL), Old Mutual (LON:OML), RSA Insurance Group (LON:RSA) and Admiral Group (LON:ADM) posted small losses.
Aviva (LON:AV) was at the bottom of the sector with a 1.3% decline.
Private equity group 3i (LON:III) stood just below the opening level.
Small Cap movers
Other notable movers among the small caps included environmental science and technology company Accsys Technologies (LON:AXS) with a 9% decline and novel pesticides and plant nutritional products developer Plant Impact (LON:PIM), which shed more than 6%, as did developer of advanced vision based industrial systems Seeing Machines (LON:SEE).
Mobile email and data synchronisation group Synchronica PLC (LON:SYNC) and offshore wind farm developer SeaEnergy (LON:SEA) were among the best performers with gains of over 10%.
US focused Caza Oil & Gas (LON:CAZA, TSX-V:CAZ) told investors that its O.B. Ranch #1 well, on the Bongo prospect in Wharton county, Texas, has reached a depth of 12,964ft and preliminary data indicates the presence of hydrocarbon bearing sands in a shallower horizon.
Small Cap News
Metminco (ASX:MNC, LON:MNC) has completed the acquisition of 5,376,562 fully paid ordinary shares in Hampton Mining Limited, increasing its interest in Hampton from 69.4% to 71.9%.
Mobile email and data synchronization group Synchronica PLC (LON:SYNC) has announced that Argentine carrier Telecom Personal has launched its mass-market mobile email and synchronization service based on Synchronica’s flagship push email product Mobile Gateway.
Turkey and Ethiopia operating gold miner Stratex International (LON:STI) said that latest drilling results from its Oksut gold project in Turkey showed potential for high-tonnage, low-grade gold deposit at Ortacam zone and phase two was underway on the first of five drill targets.
Cleantech materials discovery company Ilika (LON:IKA) said a £153,000 UK government grant has been awarded to the development programme of a treatment for full thickness skin wounds led by its subsidiary Altrika Ltd.
Gemfields (LON:GEM) achieved the highest auction revenues to date from its latest event in London, raising US$7.5 million as prices per carat achieved soared 83% from the previous auction of higher quality material held in November. The group noted that demand for Zambian emeralds has increased, while operating costs at the flagship Kagem mine nearly halved.
In its quarterly operations report, Finders Resources (LON:FND, ASX:FND) noted a solid performance as it moves the Wetar copper project in Indonesia towards commercial production. During the second quarter to end-June 2010, the company completed upgrades to Wetar’s demonstration plant ahead of schedule.
Cove Energy (LON:COV) has concluded a conditional farm-in agreement with a DEPCO subsidiary to acquire a 15% participating interest in five contiguous deepwater blocks offshore Kenya for US$15.5 million.
Kryso Resources (LON:KYS) has secured a £10.99m investment from China Nonferrous Metals International Mining (CNMIM) in a conditional placing of 73.27m shares at 15p each. The proceeds will help fund the development, and further exploration, of the Pakrut gold project and further exploration at the Hukas nickel-copper project, both in Tajikistan.
Vatukoula Gold Mines (LON:VGM) has raised £7.4m through an equity placing, to fund a two year exploration programme focused on the wholly-owned Vatukoula gold mine and the special prospecting licenses covering the Tavua Cladera mining area in Fiji. Investors welcomed the news, with shares rising just over 5% on London’s AIM market.
Large and Mid Cap News
British Gas owner Centrica (LON:CNA) will face accusations of profiteering after revealing a 65 per cent jump in first-half earnings. Operating profits advanced to £1.56 billion from £945 million previously.
A day after taking control of Heritage Oil’s (LON:HOIL) assets in Uganda, Tullow Oil (LON:TLW) has unveiled a large strike at one of its prospects in the landlocked African nation.
Dunhill cigarette maker British American Tobacco (LON:BATS) delivered a forecast-busting set of interim results and passed on the gains in the form of a bumper dividend payment.
Prime Minister David Cameron was on hand to witness the signing of a formal agreement between London-quoted Xchanging (LON:XGH) and government officials from the Indian state of Karnataka to build an outsourcing centre.
Accounting software specialist Sage Group (LON:SGE) reported ‘improving organic growth trends’ as it said it was on target to meet City earnings forecasts for the full year.
Having seen its position as the king of the supermarkets usurped by great rival Tesco during the 1990’s, the focus now for J Sainsbury (LSE, SBRY) is to expand its UK food and non-food offering and try and reclaim some lost ground. Rising taxes and unemployment will provide obstacles for the sector as a whole however increasing margins, product mix and floor space at J Sainsbury suggest that whilst difficult economic conditions may slow profits, long term earnings continue to look robust.
Specialist engineering group and FTSE 250 constituent Lamprell (LON:LAM) has secured a US$317 million contract from Abu Dhabi’s National Drilling Company (NDC) for the construction and delivery of two jackup rigs with an option to build two further jackup rigs worth US$158.5 million each.
UK-based wealth manager, St James's Place (LON:SJP) reported a third consecutive quarter of record figures as the company’s Q2/H1 interims showed a 60% increase in operating profit to £162.1m (H109: £101m). Chief executive David Bellamy expects the company to deliver further growth over the rest of the year, despite the uncertainty in the economy and stock market.
