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Lloyds, RBS and Barclays bounce back, FTSE 100 volatile in the morning

Published: 12:59 12 Aug 2009 BST

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UK jobless data released this morning reported 220,000 more people lost their jobs in the three months to June, bringing the total number to 2.44 million - the highest unemployment level since 1995.

 

The news delivered another blow to the Footsie, which has struggled to get back to positive territory after falling for two straight days this week, retreating from the strong gains it made last week. The top-tier index barely held on to the opening level shortly after trading opened, but then quickly slipped into the red despite a modest rebound in financial stocks and strong gains by a few companies, including construction and engineering group Balfour Beatty, which reported strong interim results and beefed up its order book by securing a £100 million stake in South West Water’s £590 million five-year programme.

 

Miners partially recovered later and the banking sector extended gains to put the index back in the blue by midday, helping it inch closer to 4,700.

 

Key movers

 

Balfour Group (LSE: BBY) soared over 7% after releasing interim results, further bolstering the FTSE 100, which also received strong support from the partly nationalized Lloyds Group (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS). Both banks gained almost 5%, recovering some of their losses earlier this week. Last week RBS released disappointing interim results and Lloyds was reported to be mulling a multibillion cash call to avoid participating in the government’s asset protection scheme (APS). Barclays (LSE: BARC) also joined in with a 1.8% gain.

 

Insurers also turned losses into gains today with majors Legal & General (LSE: LGEN), Aviva (LSE: AV) and Friends Provident (LSE: FP) advancing 1-2%. Oil stocks were off to a recovery after declines in oil price dragged the sector down yesterday. UK based oil and gas producer BG Group (LSE: BG) got a boost from ING, which upgraded the stock from “sell” to “hold,” bringing a slight relief to the energy sector as oil prices continued their fall into Wednesday. With the exception of BP (LSE: BP), which declined marginally, energy stocks were in the blue this morning.

 

Other notable movers included can maker Rexam (LSE: REX), which was still on the rise this morning following Monday’s upgrade from Credit Suisse, which upped its shares from “neutral” to “outperform.” The group’s shares rose to 250p today, marking a 1.5% improvement from Tuesday.

 

In the red

 

Metal prices declined, flooding the top losers list with miners yet again. Silver miner Fresnillo (LSE: FRES) emerged as the top faller in the FTSE 100 with a 4% retreat. Rio Tinto (LSE: RIO) fell 1.3% on confirmation that some of its executives were formally charged with spying and bribery in China, where they have been held in custody since early July. Kazakhstan’s biggest miner and FTSE 100 constituent Kazakhmys (LSE: KAZ) posted a 1.8% decline after copper prices slid this morning.

 

Europe’s largest tour operator TUI Travel (LSE: TT) said it expected to meet the full year expectations while reporting a 57% hike in profit amid slumping revenues in the quarterly report it released today, projecting the market conditions to remain challenging. The company was down 3%, while rival Thomas Cook Group (LSE: TCG), which is set to release own results tomorrow, joined in with a 2% slide.

 

Utility companies also contributed to the decline as water utility and waste management firm Pennon Group (LSE: PNN) slipped 3.6%, while RSA Insurance went against the tide, slipping 3% as other insurance majors were on the rise.

 

Commodities

 

The Organization of Petroleum Exporting Countries (OPEC) projected that oil prices would decline steeper than previously projected next year as the economic recovery has been progressing at a slower pace than expected.

 

US Light crude slipped over US$1 on the news, retreating to US$69.45, while Brent spot stood below US$72 per barrel.

 

Oil and gas sector: majors and midcaps steady, juniors soar

 

Oil stocks, however, didn’t take any heat from the declining prices and BG Group managed to surge back above 1,000p per share, adding 3% shortly after trading opened. While BP (LSE: BP) was slightly in the red, another supermajor Shell (LSE: RDSB) added 1.2%.

 

Midcaps followed with gains as Bangladesh and Nepal operating Cairn Energy (LSE: CNE) added 1%, while Dragon Oil (LSE: DGO) and Tullow Oil (TLW) rose 1.5%. Dana Petroleum (LSE: DANA) opened with insignificant gains.

 

Some juniors made steeper gains with Europe focused oil and gas developer Ascent Resources (AIM: AST) climbing 11%, Kurdistan and Algeria explorer Gulf Keystone Petroleum (AIM: GKP) soared 8.5% and Ukraine focused gas producer Regal Petroleum (AIM: RPT) rose 5.5%.

 

US focused Empyrean Energy (AIM: EME) and Gulfsands Petroleum (AIM: GPX), an oil and gas company with assets in Iraq, Syria and Gulf of Mexico, followed fellow juniors, climbing 3% and 4.6% respectively.

 

Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) joined the party with a 4% gain, while Italian focused oil and gas junior Mediterranean Oil & Gas (AIM: MOG) added 2.3%.

 

Precious metal companies fall

 

Gold failed to recover from the losses it has sustained this week, remaining at around US$944 per ounce. Silver fell to US$14.24/oz and Platinum declined to US$1,235/oz.

 

If the impact from the declining metal prices was not enough, major Aquarius Platinum (LSE: AQP) further weighed on the sector, posting a full year net loss of US$45.7 million and reporting an output slump stemming from the shutdown of its Everest mine last year. The company declined 1%. Johnson Matthey (LSE: JMAT) was flat, but Lonmin was able to post a 2.3% gain.

 

Silver miner Fresnillo (LSE: FRES) opened with a 1% decline and FTSE 250 silver miner Hochschild Mining (LSE: HOC) followed with a 1.8% slide.

 

Gold miners Peter Hambro Mining (LSE: POG) and Randgold Resources (LSE: RRS) declined marginally.

 

Juniors followed with steeper losses. Australian gold and copper prospector Solomon Gold (AIM: SOLG) and Uzbekistan focused gold miner Oxus Gold (AIM: OXS) and Africa focused gold deposit developer Cluff Gold (AIM: CLF) moved with the market, pulling back 2.3%, 4% and 1.4% respectively. UK gold miner Mercator Gold (AIM: MCR) slipped 4.8%. Australian gold producer Leyshon Resources (AIM: LRL) dropped 4.8%. South American mineral explorer Horizonte Minerals (AIM: HZM) lost 3.5% and junior platinum miner Platmin (AIM: PPN) slipped 3%.

 

Copper and gold developer EMED Mining (AIM: EMED) and Philippines focused gold producer Medusa Mining (AIM&ASX: MML) both moved against the trend, rising 4-5%.

 

Base metal miners mixed

 

Base metal prices retreated slightly. Copper moved down to US$2.73/pound, Zinc held on to the US$0.80 barrier, while Nickel retreated US$0.05 to US$8.79 per pound.

 

Anglo American (LSE: AAL) was the only other major to follow Kazakhmys (LSE: KAZ) and Rio Tinto (LSE: RIO) with a small loss. Other base metal miners managed to stay afloat as Antofagasta (LSE: ANTO), BHP Billiton (LSE: BHP) and Vedanta Resources (LSE: VED) all gained over 1%.

 

Junior stocks were more volatile. Australia focused coking coal producer Caledon Resources (AIM: CDN) and Uranium and copper explorer Kalahari Minerals (AIM: KAH) both rose over 2%. South America focused zinc miner Herencia Resources (AIM: HER) rallied 6.7% to emerge as one of the leading risers in the sector, but Iron ore, magnesium and uranium explorer Red Rock Resources (AIM: RRR) slipped 6%.

 

Insurance, banks, private equity

 

Unlike other major banks, Standard Chartered (LSE: STAN) opened in the red, losing less than 1%.

 

Insurer Old Mutual (LSE: OML) and Standard Life (LSE: SL) were unmoved, while RSA Insurance Group (LSE: RSA) slipped 3%.

 

Prudential (LSE: PRU) rose 1.3%.

 

Other Small Cap Movers

 

Environmental science and technology company Accsys Technologies (AIM: AXS) was volatile again, slipping 3.6% after making solid gains on Tuesday. Medical technology company Biocompatibles International (LSE: BII) and crop nutrition and protection specialist Plant Impact (AIM: PIM)  both retreated  3-4%.

 

Large and Mid Cap News

 

Royal Bank of Scotland Group PLC (LSE: RBS) has reached agreement in principle for the sale of its 99.37 percent holding in The Royal Bank of Scotland Ltd (RBS Pakistan) to MCB Bank Ltd, formerly Muslim Commercial Bank, for approximately US$87 million. RBS Pakistan is listed on the Karachi stock exchange. The transaction is subject to regulatory approvals and is expected to complete in the fourth quarter of 2009.

 

The world’s largest miner BHP Billiton (LSE: BLT) revealed full year profits were down 62% to US$5.9 billion, while the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) declined 21% to US$22.3 billion and revenues dipped 16% to US$50.2 billion.

 

Engineering, construction and services group Balfour Beatty PLC (LSE: BBY) reported a solid rise in revenues and profit for the first half and separately announced that it has been selected as an alliance partner for the delivery of South West Water's maintenance and replacement programme. The company increased total revenue to £5.07 billion in the six months to June 27 2009 from £4.33 billion a year earlier, generating pretax profit before exceptional and amortisation of £108 million, up from £95 million last year. It is raising the interim dividend by 8 percent to 5.5 pence a share.

 

Anglo American PLC (LSE: AAL) announced it plans to sell its 49.5 percent holding in Southern Africa focused agri-processing business Tongaat Hulett Ltd to institutional investors via an accelerated bookbuild and an exchangeable bond issue. Anglo is offering its entire holding of 51.2 million Tongaat shares. It did not provide pricing details.

 

TUI Travel (LSE: TT) reported a 57% jump in Q3 profits and reiterated that it expected to meet full year expectations despite “challenging market conditions.” The company’s revenue for the quarter ended 30 June 2009 slipped 1% to £3.57 billion, but underlying operating profit jumped 57% year on year to £102 million as the company cut the number of holiday packages offered, but raised the prices to adapt to the changing market conditions, TUI said in the quarterly report released today.

 

China's state-held Sinochem Corp is buying Emerald Energy PLC (LSE: EEN) in a recommended  750 pence per share cash deal, valuing the UK oil and gas explorer at approximately £532.1 million, the companies said in a statement. The offer represents a premium of nearly 34 percent over the closing price of 560.50p on July 10, the last trading day before Emerald announced that it had received an approach. The shares closed at 675 pence yesterday. Following the announcement this morning, Emerald stock shot up more than 9 percent and was at around 736 pence in midmorning trade.

 

MITIE Group PLC (LSE: MTO) said it is buying the UK technical facilities management operations of Dalkia PLC, controlled by French utility groups Veolia Environnement and EDF, for up to £130 million in cash. It also announced a fully underwritten placing of 19 million new ordinary shares, representing approximately 6 percent of MITIE's currently issued share capital, with institutional and certain other qualifying investors to raise at least £40 million before expenses.

 

Small Cap News

 

Birmingham City PLC (LSE: BMC) confirmed it has received an approach from 29.9 percent shareholder Grandtop International Holdings Ltd which may or may not lead to an offer for the entire issued share capital. Grandtop is the investment company of Hong Kong businessman Carson Yeung and acquired its holding in 2007. The statement came in response to press reports putting the amount that Yeung is paying £70 million for the remaining holding in the football club. The Sun reported this amount is 20 million higher than what Yeung planned to pay in his failed previous takeover attempt two years ago. He failed to raise the required amount of cash after initially spending £15 million on the 29.9 percent stake.

 

Platinum development company, Nkwe Platinum (ASX: NKP) has announced it will raise $7.5 million at 25 cents per share via a placement to sophisticated and institutional investors.  A free 24 month option (35 cents) for every two shares held will be attached. Reflecting the increasing value inherent in the Garatau / Tubatse project, investors have driven the Nkwe share price up from 12 cents earlier this year to 28 cents.  With market capitalisation now at $150 million, the market is now recognising the value in the project.  Nkwe Platinum is developing the project in partnership with Xstrata (LSE: XTA).

 

Cash machine deployer Cashbox PLC (AIM: CBOX) said the UK interbank ATM network LINK is opening its network to Chinese cardholders, and the company will provide the ATM that will be used for a symbolic withdrawal at a ceremony in London today. Chinese bankcard association China Unionpay (CUP) is now connected to the LINK network, which means that more than 1.8 billion cards issued to Chinese account holders can now be used to withdraw cash through LINK's 64,000 ATMs.

 

UK and Canadian listed mineral exploration and development junior, Rambler Metals and Mining (TSXV: RAB, AIM: RMM) said it had entered into exclusive talks to acquire the Nugget Pond processing facility from Crew Gold (TSX: CRU). The processing facility is situated only 40 kilometres from Rambler’s Ming Copper-Gold Mine on the Baie Verte Peninsula in Newfoundland.  By acquiring the facility, Rambler would improve the economics of developing the Ming Mine.  Rambler said the processing facility would require a copper flotation circuit but was otherwise in good condition.

 

High grade, low cost gold producer, Medusa Mining (ASX: MML) has defined a maiden JORC inferred resource at the Bananghilig Gold Deposit in the Philippines of 650,000 ounces of gold at 1.3 g/t. Medusa's main asset is the Co-O gold mine on the southern Filipino island of Mindanao, which has a JORC resource of 1.38 million ounces of gold at an average grade of 10.8 g/t.

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