Overview: the FTSE 100 recovered after sliding earlier in the session after US retail sales were shown to have risen 0.4% in August, marking the biggest gain in five months.
An earlier update showed that UK inflation remained at 3.1% in August.
Essar Energy (LON:ESSR) led the blue chips with a 2.6% gain. Outsourcing group Capita (LON:CPI) and telecom company Cable & Wireless Worldwide (LON:CW) added just over 2%. Defence contractor Cobham (LON:COB) tacked on nearly 2%.
Chipmaker ARM Holdings (LON:ARM) was the heaviest faller with a loss of nearly 5%. Plumbing and heating materials manufacturer Wolseley (LON:WOS) and turbine maker Rolls-Royce (LON:RR) shed 2.3%. Tour operator TUI Travel (LON:TT), Financial Times publisher Pearson (LON:PSON) and commercial property company British Land (LON:BLND) lost more than 1.5%.
US stocks were off to a negative start. The Dow Jones Industrial Average and the NASDAQ composite slid 0.2%, while the broader S&P 500 index lost 0.3%.
Commodities
Oil prices declined following yesterday’s rally that saw the futures hit one month highs on good news from China and anticipation of strong retail sales data in the US.
Oil prices usually track movements in stock markets as share prices serve as an indicator of the strength of the economy and outlook for energy demand.
However, crude futures declined this morning ahead of US inventories reports that will be released by the American Petroleum Institute (API) and the US Energy Department today and on Wednesday respectively.
Crude oil stockpiles in the US have been on the rise, suggesting declines in demand in the world’s largest energy consumer.
Secretary General of OPEC (Organization of Petroleum Exporting Countries) Abdullah Salem el-Badri said today that the organization expects oil prices to be in the range between US$72-83/barrel in the nearest future and that the outlook for 2011 was still cloudy.
El-Badri has also stated that OPEC is not looking to expand.
The cartel is celebrating its 50th anniversary today.
October Brent Crude slid to US$78.74/barrel, while US light, sweet crude for October delivery declined to US$76.79/barrel.
BP (LON:BP) posted a small gain, while fellow supermajor Shell (LON:RDSB) declined marginally, as did BG Group (LON:BG).
Tullow Oil (LON:TLW) and Cairn Enegy (LON:CNE) did better, tacking on 1.4% and 1.2% respectively.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) added just over 1.5%.
Midcaps didn’t move by much. Dana Petroleum (LON:DNX) and Melrose Resources (LON:MRS) stood just above the opening level, while Dragon Oil (LON:DGO), Heritage Oil (LON:HOIL), JKX Oil & Gas (LON:JKX) and Premier Oil (LON:PMO) posted small losses and Soco International (LON:SIA) declined 1%.
Salamander Energy (LON:SMDR) was in the lead with a 1.7% advance.
Engineering company Wood Group (LON:WG) shed less than 1%.
European focussed oil and gas exploration and production company Ascent Resources (LON:AST) emerged as one of the top performers among the small caps with a 7% rise. Kurdistan focused Gulf Keystone Petroleum (LON:GKP) added 4.5%.
Gold nears record highs
Even though equities on both sides of the Atlantic were flat, gold rallied, stopping less than US$10 short of its record highs of US$1,265/oz.
The yellow metal is seen as one of the main safe haven assets and usually moves inversely to stock markets. One reason for today’s intense risk aversion was an update on euro zone industrial production, which showed no change from July instead of an expected 0.2% increase.
Meanwhile, Germany’s ZEW investor confidence index slipped from 14 in August to -4.3, further escalating concerns that the economic recovery in Europe is slowing.
Gold rallied to US$1,259/oz, while silver and platinum reached US$20.28/oz and US$1,573/oz respectively.
Platinum miners were in decline, while gold and silver producers posted small gains.
In the FTSE 100, gold miner Randgold Resources (LON:RRS) added 1.1%, while peer African Barrick Gold (LON:ABG) rose marginally, and silver miner Fresnillo (LON:FRES) stood just above the opening level.
Platinum miner Lonmin (LON:LMI) declined marginally.
Specialty chemicals firm Johnson Matthey (LON:JMAT) added less than 1%.
Midcaps fell into the same pattern. Aquarius Platinum (LON:AQP) declined 2%, while gold miner Petropavlovsk (LON:POG) gained 1.1% and silver producer Hochschild Mining (LON:HOC) tacked on 0.5%.
Solomon Gold (LON:SOLG) emerged as the leading riser on the London Stock Exchange, soaring 70% after reporting assay results from its Fauro gold project in the Solomon Islands.
Turkey and Saudi Arabia operation exploration company KEFI Minerals (LON:KEFI) was buoyant, jumping 25%. Kyrgyzstan focused Chaarat Gold Holdings (LON:CGH) followed with a 10% advance.
Diversified mining investment company Mercator Gold (LON:MCR) joined the party, climbing 6.5%. Philippines focused gold producer Medusa Mining (LON:MML) and the only publicly listed gold mining company with primary operations in Uzbekistan, Oxus Gold (LON:OXS), added nearly 6%.
Base metals decline
Copper and nickel slid to US$3.41/lb and US$10.46/lb, while zinc declined to US$0.973/lb.
Eurasian Natural Resources (LON:ENRC) added 1%, while most other base metal focused miners declined.
Kazakhmys (LON:KAZ) posted a small loss, while Anglo American (LON:AAL) dropped 1.1% and Antofagasta (LON:ANTO) retreated 1.3%, as did Xstrata (LON:XTA).
BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Vedanta Resources (LON:VED) were flat.
Swiss-headquartered resources company with assets in Ukraine Ferrexpo (LON:FXPO) outperformed the sector, advancing 1.2%.
Small cap companies didn’t move by much today.
Banks, insurance, private equity
Standard Chartered (LON:STAN) led the banks with a 1.1% advance. Royal Bank of Scotland (LON:RBS) and HSBC (LON:HSBA) posted small gains, while Lloyds (LON:LLOY) lost 1% and Barclays (LON:BARC) declined marginally.
Insurance companies were mixed. Legal & General Group (LON:LGEN) climbed 1.6%, while Aviva (LON:AV) and Standard Life (LON:SL) added less than 1%.
Prudential (LON:PRU) posted a small loss and RSA Insurance Group (LON:RSA) declined 1.3%.
Admiral Group (LON:ADM) and Old Mutual (LON:OML) were little moved.
Private equity group 3i (LON:III) was sitting just below the opening level.
Small Cap Movers
Other notable movers among small caps included technology company with a focus on vision based human machine interfaces Seeing Machines (LON:SEE), which rallied 9%.
Small Cap News
Shares in Solomon Gold (LON:SOLG) soared and at one point nearly doubled after the company announced the assay results from initial surface sampling on its 100% owned Fauro Island project in the Solomon Islands.
European focused oil and gas exploration and production company Ascent Resources (LON:AST) has appointed former chief executive of Alkane Energy, Cameron Davies, as a non-executive director. The company simultaneously announced that legal director Malcolm Groom and non-executive director Jonathan Legg have stepped down to “focus on other commitments”.
Petroceltic International (LON:PCI) said this morning it is confident October’s appraisal programme on the Ain Tsila gas condensate field in Algeria “will demonstrate the value of this important asset”. While the Dublin-headquartered group has assets in Tunisia and Italy, its focus is currently on Algeria and proving up a potentially world class discovery.
Norcon (LON:NCON) has continued its strategic expansion into target geographies with a new contract in Norway, while reporting positive interim results that it said reflected a resilient performance from its core business.
Mercator Gold PLC (LON:MCR, OTC:MTGDY) said it is seeking approval from holders of the unsecured convertible loan notes of principal amount £2.565 million to approve a variation of the terms.
Exploration company with assets in Chile and Argentina Patagonia Gold (LON:PGD)has commenced a drilling programme to advance the COSE gold-silver exploration target in Argentina to a NI43-101 compliant resource. The infill and extension programme, which will consist of 24 diamond core HQ drill holes for 7,000 metres, is slated for completion in Q1 2011.
Rurelec PLC (LON:RUR), the power plant developer and owner-operator of power generation assets in Latin America, said it has today placed a total of 4.25 million new shares with existing institutional shareholders at 10 pence each to raise £425,000 before expenses.
Collins Stewart initiated coverage of Latin American precious metal miner Minera IRL (TSX:IRL, LON:MIRL, BVL:MIRL) saying the shares are due for re-rating as development projects move towards feasibility. It sees strong upside potential to the current price level.
Edison Investment Research published a note on Deltex Medical PLC (LON:DEMG), saying that investment in product innovation may just be the catalyst the group needs to take the share to a level its deserves.
Large and Mid Cap News
Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO) announced it will invest US$803 million to ramp up the underground block cave project at its Argyle diamond mine in Western Australia. Following a transition from the current open pit operation, the underground will be fully operational in 2013. The project will extend the life of the mine until at least 2019.
FTSE 250 youth clothing retailer SuperGroup PLC (LON:SGP) said group trading is where it should be at this stage, and it is on track to deliver another successful year. In an interim management statement covering the three months to August 1 2010, it said group sales were up 59.8 percent up at £32.8 million from £20.5 million in the same period a year earlier.