Overview: Just as was predicted, the market switched to bullish mode in the morning following yesterday’s weak performance of UK’s key indices.
The positive sentiment was delivered by a strong session from the US stock market, where the Dow Jones industrial average jumped over 60 points, fuelled by a recovery in oil prices as data released by the Energy Information Administration (EIA) revealed an unexpected 8.4 million barrel drop in US crude stockpiles, while imports were at their lowest since September last year.
Key oil benchmarks got a big boost from the news, reversing recent losses and climbing well over the US$70 barrier.
The markets were further lifted by the UK retail sales data update released by the Office for National Statistics. It said sales were up 0.4%, bringing the total annual increase to 3.3%.
The FTSE 100 rose 60 points by midday, sitting well above the 4,700 mark.
Key movers: in the black
While the oil and gas sector predictably rose in the morning, none of the majors showed up on the leaderboard, which was crowded by miners accompanied by financial stocks. Insurer Legal & General (LSE: LGEN) and Royal Bank of Scotland (LSE: RBS) led the group.
Legal & General was fuelled by the continued speculation of a possible takeover by Resolution, which has recently acquired Friends Provident (LSE: FP).
Indian miner Vedanta Resources (LSE: VED) was up 3% after its subsidiary Sterlite Industries upped its bid for US copper miner Asarco LLC by US$500 million in hopes to beat out competitor Grupo Mexico SAB.
Building company Redrow (LSE: RDW) also emerged among the leaders with a 3% advance after making changes to its Board, and was further buoyed by a report from the Council of Mortgage Lenders stating that mortgage lending hit a 9 month high in July.
Software firms Autonomy Corporation (LSE: AU) and Sage Group (LSE: SGE) were also strong, with both adding over 3.5%.
Key movers: in the red
Not much was happening in the red in the morning as no FTSE 100 constituents lost more than 1%. Scottish whisky producer Diageo (LSE: DGE) emerged as the heaviest faller after ING downgraded its stock to “hold” from “buy.” The beverages company shed 0.8% on the update.
Aerospace and Defence group BAE Systems (LSE: BA) said it landed a contract from the Seattle transit agency for propulsion systems for up to 500 hybrid-electric buses. This came after the company said on Monday it laid off 100 employees in Phoenix after a small military contract expired. BAE was down 0.4% today, trailing only Diageo and telecommunications company Inmarsat (ISAT), which pulled back 0.5%.
Oil and gas sector climbs on prices
US light crude approached US$72.4/barrel and Brent Crude was sitting at US$71.2/barrel in the morning.
Supermajors BP (LSE: BP) and Shell (LSE: RDSB) posted identical gains of 1.7% in midmorning trade. BG Group (LSE: BG) also added 1.7%.
With the exception of Dragon Oil (LSE: HOIL), which was just below the opening level, midcaps followed the majors and basked in the sun. Cairn Energy (LSE: CNE) and Dana Petroleum (LSE: DNX) outperformed their peers, climbing 2.3% each. Heritage Oil (LSE: HOIL) also was up 1.7% and Tullow Oil (LSE: TLW) rose marginally.
Junior energy companies also traded well, with some eclipsing the gains made by the majors and midcaps.
US focused junior Empyrean Energy (AIM: EME) was in the lead with a 13% gain. Other US focused oil and gas juniors also rose; Caza Oil & Gas (AIM: CAZA) climbed 5.7%, while Nighthawk Energy rose 2%.
Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) and Kazakh-focused Max Petroleum (LSE: MXP) followed with gains of 6.5%. Diversified energy investment company, Xtract Energy (AIM: XTR) also moved with the market, adding 4.5%. Gulfsands Petroleum (AIM: GPX) continued its recent form, climbing nearly 4%, as did Northern Petroleum (AIM: NOP) which climbed 3%. Cameroon, Kazakhstan and Russia focused junior, Victoria Oil & Gas (AIM: VOG) moved 4% higher, pushing through the 6 pence barrier.
Precious metal miners gain as prices pick up
Metal prices continued recovery from a slump that started on Friday and continued into this week, though Gold was moving up at a rather slow pace. Gold climbed to US$944/ounce. Silver returned to US$14.00/ounce, while Platinum managed to tack on a further US$10, rising to US$1,247/ounce.
Platinum miners were the leading risers in the group, reaping gains form the rising platinum price. Platinum producers Aquarius Platinum (LSE: AQP) and Lonmin (LSE: LMI) rose 5.2% and 4.9% respectively. Specialty platinum catalyst firm Johnson Matthey (LSE: JMAT) added 2.4%.
Silver miners put up a slightly weaker performance. FTSE 100 constituent Fresnillo (LSE: FRES) was up less than 1%, while mid tier silver producer Hochschild Mining (LSE: HOC) did slightly better, climbing 1.4%.
Gold producers Randgold Resources (LSE: RAND) and Peter Hambro Mining (LSE: POG) fell into the same pattern as the rest of the sector with improvements of 2.9% and 1.6% respectively.
Gold juniors did better with a few companies outperforming the market with solid gains.
Africa operating gold miner GMA Resources (AIM: GMA) leaped almost 9%, while Uzbekistan focused gold miner Oxus Gold (AIM: OXS) rose 8%. Metals Exploration (AIM: MTL), which is developing a large gold-molybdenum project in the Philippines also rose 8%. South Africa gold producer, Pan African Resources (AIM: PAF) climbed 2.5%.
Kryso Resources (LSE: KYS) said today it has raised £495,250 in the final tranche of an equity placing agreement to bring the total to £1.2 million to fund the feasibility study and drilling at its Pakrut gold project. The news helped it to a 7.4% climb.
Base metal miners follow
Base metal prices have also made good progress, moving up from yesterday’s levels. Copper climbed to US$2.78/pound, while Nickel was at US$8.78/pound, slowly crawling back to the US$9/pound mark. Zinc improved slightly, increasing to US$0.82/pound.
All major mining groups basked in the sun today, lifted by the recovery in metal prices. Xstrata (LSE: XTA) led the sector with a 4.7% climb. Anglo American (LSE: AAL), Antofagasta (LSE: ANTO) and Kazakhmys (LSE: KAZ) rose over 3%. The world’s largest miner BHP Billiton (LSE: BLT) and Vedanta Resources (LSE: VED) were up around 2.5%. Rio Tinto (LSE: RIO) climbed 2%, while FTSE 250 iron ore miner, Ferrexpo, (LSE: FXPO) was able to add 3.2%.
Juniors generally didn’t show much movement, but there still were some notable risers.
Russian focused Amur Minerals (AIM: AMC) jumped 130% after updating its reserves estimate for its Kun-Manie nickel-copper project in Russia, putting the overall value at US$6.9 billion. Tunisia focused metal miner Maghreb Minerals (AIM: MMS), which did not release any news today, perked up 38%. Copper and gold junior, EMED Mining (AIM: EMED) climbed 5.5%.
Banks, insurance, private equity
Financial stocks were high in demand in early trade.
Partly nationalised banking groups Lloyds (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS) both tacked on over 3%.
Barclays followed with a 2.2% advance.
HSBC (LSE: HSBA) and Standard Chartered (LSE: STAN) failed to catch up with the market and rose below 1%.
Insurer also surged, led by Legal & General (LSE: LGEN), the market’s leading riser today with a 4.5% increase, fuelled by takeover speculation. Prudential (LSE: PRU) was close, rallying 3%.
Aviva (LSE: AV), Old Mutual (LSE: OML) and Standard Life (LSE: SL) were strong with gains of over 2%.
Other Small Cap Movers
Other notable movers among small caps included Software producer smartFOCUS (AIM: ATF), which rose 17.5% after releasing multi-channel marketing software in Japan. Environmental science and technology company Accsys Technologies (AIM: ACS), jumped 10% after landing an order for another wooden road bridge in the Netherlands, also saying Accoya wood sales were growing. Interim results also lifted Amphion Innovations (AIM: AMP) 10% higher, which reported a significantly improved first half result and no change in its Net Asset Value (NAV). Imaging software specialist, Medicsight (AIM: MDST) rose 7.5%, continuing an upward trend from lows posted earlier this year.
Large and Mid Cap News
Shares in Wellstream Holdings Plc (LSE: WSM) came under pressure after the oil and gas services group reported weak interim results and lowered guidance for the second half, though stating the business is well positioned to benefit once the oil and gas market recovers sometime in 2010.
Cheltenham-based steam valve and pump maker Spirax-Sarco Engineering PLC (LSE: SPX) said benefits from currency movements lifted H1 sales 5%, yet profits and earnings per share were down, missing some forecasts. However, the group still raised the interim dividend expressing confidence in its future prospects and expecting benefits from its cost reduction campaign to fully come into effect in the second half.
Small Cap News
Accsys Technologies PLC (AIM: AXS) reported a 51 percent year-on-year rise in sales revenue from its proprietary Accoya wood in the three months to end-June 2009 and said it has won the order to supply Accoya for the second heavy traffic road bridge in Sneek, the Netherlands.
Shares in Amphion Innovations (LSE: AMP) perked up this morning after the company reported no change in its Net Asset Value (NAV) per share (in US$ terms) and also said that in the first half of 2009 it came “very close to breakeven”.
Investment holding group Silanis International Ltd (AIM: SNS) reported rising revenues and narrowing losses in the first half for Silanis Technology Inc, specialised in electronic and digital signature software. Silanis’ sole investment at present is a 25 percent stake in Silanis Technology.
Australian regional carrier Skywest Airlines Ltd (AIM: SKYW) is expecting to benefit from a significant increase in capacity following news that the A$50 billion Gorgon project to develop gas reserves offshore Western Australia has received ministerial approval.
Polo Resources Ltd (AIM: PRL) said it sold a 6.66 percent stake in Berkeley Resources (ASX: BKY), or 8,221,893 shares, for A$8.49 million. It still holds 10,388,181 Berkeley shares and has options over a further 5,670,037 ordinary shares.
Silver Swan Group (ASX: SWN) has advised that it has agreed to release 2,000,000 shares held by Mercator Gold (AIM: MCR) from voluntary escrow. In accordance with Listing Rule 3.10A these shares will be released from escrow in 10 business days. Mercator Gold Plc was issued 10,000,000 ordinary shares and 4,000,000 performance shares in April 2008 upon the acquisition of the Meekatharra tenements by Silver Swan Group Limited to be escrowed for 2 years.
Finders Resources (ASX/AIM: FND) has advised that the recently announced sale by Straits Resources (ASX: SRL) of its subsidiary, Straits (Whim Creek) Pty Ltd to Venturex Resources (ASX: VXR), will have no effect on the agreement between Straits and Finders for the option to purchase the solvent extraction/electrowinning plant from Straits (Whim Creek) Pty Ltd.
Russian operating mineral miner Amur Minerals Corporation (AIM: AMC) just got closer to securing mining licenses for the three Kun-Manie deposits in eastern Russia, having submitted its reserve estimate for the Maly Krumkon deposit, valuing its reserves at US$1.8 billion.
Shares in Philippines-focused Toledo Mining Corp (AIM: TMC) were hit by news BHP Billiton had lodged a claim for demurrage after bad weather delayed a shipment of ore from the Berong nickel mine to the Yabulu refinery in Queensland, Australia. However, Toledo said that the demurrage amount was being contested by its majority-held unit Berong Nickel Corp, which had declared a force majeure during the ship loading.