Overview: the FTSE 100 clawed back most of last week’s losses today, advancing 1% as Old Mutual rallied after confirming a bid for its South African bank Nedbank from HSBC, while miners were higher on optimism that the Australian election would lead to the mining super tax being scrapped.
In the most significant macroeconomic update of the day, the Chicago Fed national activity index was reported to be unchanged in July. The news had little impact on the markets.
Insurer Old Mutual (LON:OML) led the blue chips with a 4% advance after announcing it was in exclusive talks with HSBC to sell a majority stake in its South African banking asset Nedbank for what has been reported to be up to £4.5 billion. Oil and gas engineering firm Petrofac (LON:PFC), another insurer Aviva (LON:AV) and plumbing and heating materials manufacturer Wolseley (LON:WOS) all added just over 3%. Silver miner Fresnillo (LON:FRES) gained nearly 3%, while insurer Prudential (LON:PRU), base metals miner Antofagasta (LON:ANTO) and InterContinental Hotels Group (LON:IHG) rose 2.5%.
Temporary power provider Aggreko (LON:AGK) and Financial Times publisher Pearson (LON:PSON) were the only FTSE 100 constituents to lose more than 1%, shedding 2.3% and 1.3% respectively.
Commodities
Oil prices rebounded today, moving slightly higher following a rough week that saw equities and commodities decline on weaker than expected US macroeconomic data. The Labor Department reported an unexpected rise in initial jobless claims to nine month highs at 500,000, while the Philly Fed manufacturing activity index showed the first contraction since July 2009 with a decline from 5.1 to -7.7.
This data followed a steeper than expected drop in non-farm payrolls reported earlier this month and downbeat assessments of the economy by the Federal Reserve and the Bank of England (BoE).
Investors are now looking to the first revision of US Q2 GDP, which will be out on Friday and provide more clues about the pace of the economic recovery. The markets are increasingly pessimistic in the wake of the recently released downbeat jobs and manufacturing data and risk aversion is expected to increase during this week ahead of Friday’s GDP figures, which should lift safe haven assets such as gold and the US dollar. The American currency has been on the rise against the euro recently with the EUR/USD rate hitting six week lows on Friday.
The euro remained weak today, sliding to 1.2711 following early gains against the US dollar after the euro zone’s services PMI (purchasing managers index) fell from 55.8 in July to 55.6 in August, while manufacturing PMI declined from 56.7 to 55.0, failing to meet expectations.
The downward trend in the euro limited gains in oil prices. A stronger greenback makes dollar denominated commodities such as crude more expensive for holders of other currencies, curbing demand.
Movements in equity markets serve as an indicator of the strength of the economy and the outlook for energy demand.
Oil prices trimmed early gains following the decline in euro. October Brent Crude stood at US$74.58/barrel, while US light, sweet crude for October delivery slipped back below US$US$74/barrel.
Supermajors BP (LON:BP) and Shell (LON:RDSB) were sitting just below the opening levels, while other blue chip oil and gas producers advanced. BG Group (LON:BG) and Tullow Oil (LON:TLW) posted small gains, while Cairn Energy (LON:CNE) led the way with a 2% climb.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) did well, tacking on 1% and 2.5% respectively.
Midcaps were in the black with the sole exception of Salamander Energy (LON:SMDR) which declined 0.5%.
Melrose Resources (LON:MRS) was the top performer in the group with a gain of over 4%. Soco International (LON:SIA) followed, tacking on 2%. Dana Petroleum (LON:DNX), Dragon Oil (LON:DGO), Heritage Oil (LON:HOIL), JKX Oil & Gas (LON:JKX) and Premier Oil (LON:PMO) added less than 1%.
Wood Group (LON:WG) was flat, while another services company, Wellstream Holdings (LON:WSM), advanced 1.5%.
Mediterranean and North African area focused explorer and producer Petroceltic International (LON:PCI) and Mongolia focused Petro Matad (LON:MATD) were among the best performers in the sector, rallying 11% and 7% respectively.
Gold holds steady, silver and platinum inch lower
Despite today’s positive trend in stock markets gold held steady at nearly US$1,230/oz as investors remained jittery after the latest US jobs data and ahead of Friday’s US GDP figures. They continued to pour money into safe haven assets such as gold and the US dollar.
Gold held steady at US$1,227/oz, while silver and platinum inched lower to US$18.01/oz and US$1,507/oz respectively.
Major mining stocks were in demand today with all precious metals focused companies in the FTSE 350 posting gains. Silver miner Fresnillo (LON:FRES) and platinum miner Lonmin (LON:LMI) climbed 3.3% and 2.1% respectively, while fellow FTSE 100 constituent, gold miner Randgold Resources (LON:RRS), added 1%, as did peer African Barrick Gold (LON:ABG).
Specialty chemicals firm Johnson Matthey (LON:JMAT) rose marginally.
Aquarius Platinum (LON:AQP) led the sector in the FTSE 250 with a 3.7% advance. Gold miner Petropavlovsk (LON:POG) and midcap silver producer Hochschild Mining (LON:HOC) tacked on 2% and 1% respectively.
Horizonte Minerals (LON:HZM) led the juniors with a 12.5% rally after signing a US$4.5 million earn in agreement on its wholly owned Falcao gold project in Brazil with AngloGold Ashanti. The only publicly listed gold mining company with primary operations in the Republic of Uzbekistan Oxus Gold (LON:OXS) followed, advancing 8% after announcing the first results from its exploration programme at the territory of its 50% owned Amantaytau Goldfields joint venture. Gold and base metals focused explorer and developer Stratex International (LON:STX) and Philippines operating gold producer Medusa Mining (LON:MML) climbed 6.5% and 5% respectively.
Turkey and Saudi Arabia focused gold and copper explorer KEFI Minerals (LON:KEFI) moved in the opposite direction, shedding 5%.
Miners rise despite declines in metal prices
Base metals were in decline. Copper and nickel slid to US$3.27/lb and US$9.57/lb, while zinc moved down to US$0.91/lb.
Base metals focused stocks were on the rise with the sole exception of Eurasian Natural Resources (LON:ENRC), which shed nearly 1%.
Anglo American (LON:AAL) and Antofagasta (LON:ANTO) led the sector with gains of 2.5%. The world’s largest miner BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) advanced 2%. Kazakhmys (LON:KAZ), Xstrata (LON:XTA) and Vedanta Resources (LON:VED) moved up 1.7%, 1.2% and 1% respectively.
Swiss-headquartered resources company focused on the production and export of iron ore pellets Ferrexpo (LON:FXPO) moved with the sector, tacking on 1.5%.
Mineral resource exploration and development company focused on base metal projects in he east of Russia Amur Minerals (LON:AMC) spiked 24% to emerge among the top performing stocks in the market. Miner Noventa (LON:NVTA) followed with a 11.5% surge after making a tantalum shipment to a major customer ahead of schedule.
Mineral exploration company focused on the discovery and development of gold, uranium and other minerals Red Rock Resources (LON:RRR) was in the red with a 5% loss after raising £307,000.
Banks, insurance, private equity
Barclays (LON:BARC) led the banking stocks with a 2% gain. Part-nationalised banks Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) followed, climbing 1.5%. HSBC (LON:HSBA) and Standard Chartered (LON:STAN) tacked on about 1%.
Old Mutual (LON:OML), which is currently in exclusive talks with HSBC to sell a majority stake in its banking asset Nedbank in South Africa, led the insurers with a 4.5% advance. Aviva (LON:AV), Prudential (LON:PRU) and Standard Life (LON:SL) added 3.3%, 2.5% and 2% respectively. Admiral Group (LON:ADM) and Legal & General Group (LON:LGEN) tacked on 1.6% and 1.2% and RSA Insurance Group (LON:RSA) posted a small gain.
Private equity group 3i (LON:III) rose 1.2%.
Small Cap Movers
Other notable movers among the small caps included environmental science and technology company Accsys Technologies (LON:AXS) with a 5% gain, Zimbabwe and Mozambique focused investor LonZim (LON:LZM), which rallied 10%, as did developer of novel stem cell therapies ReNeuron (LON:RENE).
Small Cap News
Goldplat (LON:GDP) told investors that it expects the Kilimapesa Hill gold mining project to reach its full processing capacity by early September, after it received the green light to begin commercial production from existing stockpiles, while the mining lease is being finalised.
AIM listed oil and gas explorer and producer Regal Petroleum (LON:RPT) has spudded exploration well E-1 Sagna in its 100% held Barlad concession in Romania ahead of schedule to provide an additional test of the regionally productive gas-bearing Sarmatian aged sandstone reservoirs.
Mozambique-focused tantalum miner Noventa (LON:NVTA) has been making rapid progress since restarting its flagship Marropino mine in Mozambique. And today it reported an earlier than expected shipment of tantalum to one of the company’s two key customers.
Synchronica (LON:SYNC) has launched a software ‘Toolkit’ for the Mobile Gateway aimed at device manufacturers using MediaTek chipsets. The company highlight that the toolkit will enable manufacturers to differentiate mass-market handsets by bundling next-generation mobile messaging services.
Syntopix (LON:SYN), the skin products firm, said this morning it had signed a collaboration deal with an unnamed company that is a “a world leader in marketing home, health and personal care brands”.
Ascot Mining (PLUS:ASMP, XETRA:AM3) is progressing towards the completion of an expansion programme at its Chassoul gold mine in Costa Rica to triple its capacity and mitigate the impact of the suspension of mill and mine development at the La Toyota concession.
Oxus Gold’s (LON:OXS) 50%-owned Amantaytau Goldfields (AGF) joint venture has kicked off a five-year exploration programme in Uzbekistan. Through the $22m programme, AGF intends to expand its existing 2.4Moz JORC-complaint gold resource to over 7Moz.
Horizonte Minerals (LON:HZM) has signed a US$4.5 million earn in agreement with AngloGold Ashanti (JNB:ANG) to develop its Falcao gold project , located in the Carajas mineral province of northern Brazil. Under the terms of the deal Horizonte will receive US$900,000 exploration funding in the first year, followed by US$1.6 million in the second year and U$2 million in the third.
Large and Mid Cap News
Banking group HSBC (LON:HSBA) has entered into exclusive discussions with fellow FTSE 100 constituent, insurer Old Mutual (LON:OML), about the possible acquisition of a majority stake of up to 70% in South Africa’s fourth largest banking group Nedbank Group.
In their respective interim statements, two of the FTSE250’s insurance groups reported on a tough trading period in which each company was hit by costly catastrophe claims. Both Amlin (LON:AML) and Hiscox’ (LON:HSX) profits were hit by severe weather, natural disasters, and both had exposure to the BP (LON:BP) / Transocean oil spill in the Gulf of Mexico.
Bezant Resources (LON:BZT) has commissioned a conceptual mining study at its Mankayan copper-gold project on the Island of Luzon in the Philippines. The study will consider a potential underground mining operation . It is also expected to provide a recommendation for an optimum mining rate, as well as a preliminary implementation plan and a financial model.