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Banks climb as Dubai secures $10 billion loan from Abu Dhabi to repay debts, FTSE 100 gains

Last updated: 11:15 14 Dec 2009 GMT, First published: 12:15 14 Dec 2009 GMT

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Overview: the FTSE 100 was buoyant this morning as investors regained confidence following a positive update from Dubai, which managed to secure a US$10 billion loan from fellow emirate Abu Dhabi to solve its immediate debt problems, including paying off a US$4.1 million debt that is set to mature today and financing the government owned conglomerate Dubai World through to April 30 2010.

The UK blue chip index advanced almost 1% in the morning, which was consistent with pre-trade expectations. London Stock Exchange Group (LSE: LSE) climbed 7.5% to take the lead. Bank Standard Chartered (LSE: STAN), which has a high level of exposure to Dubai’s debt, was a distant second with a 3.2% gain. Support services company Rentokil (LSE: RTO) also added more than 3% to make it to the top three.

Other notable risers included hospitality company Whitbread (LSE: WTB), platinum miner Lonmin (LSE: LMI), base metal miner Xstrata (LSE: XTA) and another banking group HSBC (LSE: HSBA), which all tacked on more than 2%.

Just three FTSE 100 constituents, bailed out banks RBS (LSE: RBS) and Lloyds (LSE: LLOY) ad well as commercial property company Hammerson (LSE: HMSO) lost more than 1%, sliding 1.5%. Another property company Segro (LSE: SGRO) and pharmaceutical company AstraZeneca (LSE: AZN) followed with losses of nearly 1%.

The US stock market is also expected to respond positively to the good news from Dubai as futures for all of the key indices rose this morning. Futures on the Dow Jones Industrial Average, the broader Standard & Poor’s 500 index and the technology heavy Nasdaq composite were up 0.6%, 0.5% and 0.4% respectively. Wall Street is set to extend the gains it made on Friday after better than expected US retail sales data for November, showing a 1.3% increase, which was double the expected 0.6%.

Commodities

Oil prices declined from Friday’s levels with January Brent Crude sliding to US$72.16/barrel, while US benchmark crude slipped below $70 to settle at US$69.74/barrel.

Most oil and gas stocks rose this morning. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) each added 1%, as did fellow FTSE 100 constituents Cairn Energy (LSE: CNE), Petrofac (LSE: PFC) and Tullow Oil (LSE: TLW). BG Group (LSE: BG) was slightly ahead with a 1.4% gain.

Midcaps were mixed as while Heritage Oil (LSE: HOIL) advanced 1.5%, Dana Petroleum (LSE: DNX) rose marginally and Dragon Oil (LSE: DGO) posted a small loss.

Energy investor Xtract Energy PLC (AIM: XTR) and Kazakhstan operating Max Petroleum (LSE: MXP) led the small caps, advancing 10% and 7%, respectively.

Iraq operating Irish oil company Petrel Resources (AIM: PET) headed in the opposite direction, slipping 6%. Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL), Africa focused energy company Dominion Petroleum (AIM: DPL) and EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) also were in decline, shedding about 4%.

Gold, silver and platinum fall, but miners climb

Precious metals slid this morning to erase the gains made during the overnight rally as the US Dollar strengthened further. Gold moved down to US$1,116/oz, while silver and platinum declined to US$17.16/oz and US$1,433/oz, respectively.

Most mining stocks rose this morning. FTSE 100 constituents platinum miner Lonmin (LSE: LMI), silver miner Fresnillo (LSE: FRES) and gold producer Randgold Resources (LSE: RRS) shed 2.5%, 2% and 1.5%, respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) was flat.

Midcap gold miner Petropavlovsk (LSE: POG) also was unmoved, while fellow FTSE 250 constituents Aquarius Platinum (LSE: AQP) and silver producer Hochschild Mining (LSE: HOC) both lost 1%.

Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) declined 6% after updating the market on its operations this morning. Commodity asset development company Mercator Gold (AIM: MCR) and Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) followed with losses of 5%.

Philippines focused Metals Exploration (AIM: MML) did better, tacking on 4%.

Copper and nickel slide

Base metals declined with copper and nickel slipping to US$3.10/lb and US$7.24/lb, respectively, while zinc remained unchanged at US$1.03/lb.

Base metal focused stocks were in buying mode this morning. Xstrata (LSE: XTA) was in the lead with a 2.5% advance. Anglo American (LSE: AAL), Eurasian Natural Resources (LSE: ENRC) and Vedanta Resources (LSE: VED) followed with gains of nearly 2%. Antofagasta (LSE: ANTO) and Kazakhmys (LSE: KAZ) added slightly more than 1.5%, while BHP Billiton (LSE: BLT) and Rio Tinto (LSE: RIO) tacked on 1%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, tacking on 2%.

Iron ore focused investor Red Rock Resources (AIM: RRR), Finders Resources (ASX: FND) and Australia focused coking coal producer Caledon Resources (AIM: CDN) headed south, slipping 12%, 7% and 4%.

Banks, insurers, private equity

Financial stocks were mixed this morning. Part-nationalised banks Royal Bank of Scotland (LSE: RBS) and Lloyds (LSE: LLOY) were the biggest fallers in the banking sector with losses of 3% and 1.5%. Sector peers Standard Chartered (LSE: STAN), HSBC (LSE: HSBA) and Barclays (LSE: BARC) did better with gains of 3.5%, 2% and 1%.

Insurers also moved in different directions as while Admiral Group (LSE: ADM) and RSA Insurance Group (LSE: RSA) posted marginal losses, Old Mutual (LSE: OML) rose 1% and Aviva (LSE: AV), Legal & General (LSE: LGEN) and Prudential (LSE: PRU) added more than 1.5%.

Life insurer Standard Life (LSE: SL) rose marginally.

Private equity group 3i (LSE: III) climbed 1%.

Small Cap Movers

Other notable movers among the small caps included UK based electrical components producer and supplier Cinpart (AIM: CINP) with a 5.2% climb and Africa focused investment company Lonrho (AIM: LONR), which slid 5%.

Large and Mid Cap News

In a fairly outspoken statement to its investors, Cadbury (LSE: CBRY) Chairman Roger Carr said the confectionary group is worth far more than the takeover bid put forward by Kraft Foods (NYSE: KFT). Carr warned investors, "Don't let Kraft steal your company with its derisory offer."

UK banking giant the Lloyds Banking Group (LSE: LLOY) revealed strong investor support for its £13.5 billion rights issue, saying it has received acceptances of over 95% for the capital raising. The company’s new ‘fully-paid’ shares began trading on the London Stock Exchange this morning.

UK countermeasures, materials and ammunition specialist Chemring Group PLC (LSE: CHG) said a US unit has won a supply contract with the Canadian military worth up to US$34 million under which it will provide the Canadian Armed Forces with its Husky Mounted Detection System Ground Penetration Radar GPR kits (HMDS GPR).

British Airways (LSE: BAY) and its respective trustees, have calculated the extent of the company’s total pension deficit at £3.7 billion. The airlines burgeoning pension deficit has been one of the main sticking points of its proposed merger with Iberia (IBEX: IBLA). The two European airlines finally agreed the long awaited merger last month subject to BA’s resolution of its pension problems.

Small Cap News

Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) has decided to shift attention to the Koskuduk and Beschoku projects from Naimanjal and said assay results from the Benkala project would likely be in line with expectations.

Surgical Innovations Group (AIM: SUN) said the first laparoscopic procedure (keyhole surgery) using the group’s specialist instrumentation was conducted successfully on a  reindeer at Edinburgh Zoo.

Ascent Resources (AIM: AST) looks to secure funds for its Eastern European projects, seeking shareholder approval for the proposed placing to raise £6 million after the results from a 3D survey at the Petisovci oilfield in Slovenia proved to be better than expected.

Range Resources Limited (AIM: RRL) and Africa Oil Corp (TSX-V: AOI) have modified the terms of the existing production sharing agreement (PSA) with Somalia's Puntland State over the Dharoor and Nugaal valley exploration areas, where Vancouver-based exploration company Lion Energy (TSX-V: LEO) holds a 15% interest.

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