Overview: the FTSE 100 declined 0.2% today despite a positive US jobless claims update, which showed a decline of 3,000 in initial unemployment benefits to 450,000.
In other news, UK retail sales unexpectedly declined 0.5%, while an increase was expected.
Telecom group Cable & Wireless Worldwide (LON:CW) and base metal miner Eurasian Natural Resources (LON:ENRC) led the blue chips with gains of 4%. Oil and gas supermajor BP (LON:BP) added 1.5%. Financial Times publisher Pearson (LON:PSON) climbed 1.2%. Temporary power provider Aggreko (LON:AGK) and tour operator TUI Travel (LON:TT) rose 1%.
Interdealer broker ICAP (LON:IAP) was the heaviest faller in the FTSE 100 with a 4% loss. Telecom group BT (LON:BT) and defence and aerospace systems manufacturer BAE Systems (LON:BA) slid 3% and specialist banking group Investec (LON:INVP) dropped 2.5%. Packaging group Rexam (LON:REX), turbine manufacturer Rolls-Royce (LON:RR) and plumbing and heating materials manufacturer Wolseley (LON:WOS) declined 1.5%.
US stocks were off to a negative start. The Dow Jones Industrial Average and the NASDAQ composite slid 0.25%, while the broader S&P 500 index declined 0.45%.
Commodities
Oil prices were still falling under pressure from the anticipated restart of the 6A Line oil pipeline connecting Canada and the US, which is now set for Friday morning.
Line A6, which was drained and shut down due to a rupture, has a capacity of 0.67 million barrels per day, making it the largest pipeline connection Canada and the US.
It was expected to take longer to put the pipeline back into operation and stop the disruption in the deliveries of Canadian oil to refineries in the US Midwest.
Meanwhile, concerns about the rise in crude stockpiles in the US eased after the US Energy Department reported a drawdown of 2.5 million barrels in US inventories.
On Tuesday, the American Petroleum Institute (API) reported that crude inventories gained 3.3 million barrels last week.
The prices got some help from the US National Hurricane Center, which said that tropical storm Karl that is currently heading to the Gulf of Mexico could become a hurricane as soon as tomorrow. The strengthening of Karl increases the risk of a disruption to oil production in the Gulf.
October Brent Crude stood at US$79.55/barrel, while US light, sweet crude for October delivery dropped to US$75.42/barrel.
Supermajors BP (LON:BP) and Shell (LON:RDSB) climbed 2.1% and 1.2% respectively. BG Group (LON:BG) followed with a small gain.
Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW) declined marginally.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) moved only little.
Midcaps didn’t show much movement today. Dragon Oil (LON:DGO) and JKX Oil & Gas (LON:JKX) added 1%, while Heritage Oil (LON:HOIL) posted a marginal gain and Dana Petroleum (LON:DNX) was flat.
Melrose Resources (LON:MRS), Premier Oil (LON:PMO) and Soco International (LON:SIA) declined marginally and Salamander Energy (LON:SMDR) lost 1%.
Services company Wood Group (LON:WG) was sitting just below the opening level.
Energy sector focused investor Xtract Energy (LON:XTR) was among the top performing small caps with a 15% rally.
Gold sets new record highs on inflation fears
The surge in gold prices continued today with the yellow metal setting new record highs at nearly US$1,276/oz after rising 0.7% during the day.
The demand for gold was boosted by today’s update on the US producer prices, showing an increase of 0.4%. This was the biggest gain in five months and double July’s 0.2% rise.
The data spurred inflation fears, raising gold’s appeal as an inflation hedge.
Gold currently stands at US$1,273/oz. Other precious metals also did well with silver and platinum rising to US$20.68/oz and US$1,605/oz respectively.
Gold producers Randgold Resources (LON:RRS) and African Barrick Gold (LON:ABG) advanced, tacking on 0.5% and 1.2%, while other major mining stocks declined.
Silver miner Fresnillo (LON:FRES) and platinum miner Lonmin (LON:LMI) posted small losses, as did specialty chemicals firm Johnson Matthey (LON:JMAT).
In the FTSE 250, Aquarius Platinum (LON:AQP) and silver producer Hochschild Mining (LON:HOC) declined 3.2% and 2.8%, while another midcap, gold miner Petropavlovsk (LON:POG), lost 1%.
Turkey focused gold exploration and development company Ariana Resources (LON:AAU) and gold and high-value base metals focused explorer and developer Stratex International (LON:STI) outperformed the sector, advancing 8% and 6.5% respectively.
Base metal miners mixed
Copper and zinc rose to US$3.47/lb and US$0.968/lb, while nickel declined to US$10.51/lb.
Eurasian Natural Resources (LON:ENRC) led the sector with a 4% advance.
Kazakhmys (LON:KAZ) rose marginally.
Antofagasta (LON:ANTO), BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Xstrata (LON:XTA) posted small losses.
Anglo American (LON:AAL) and Vedanta Resources (LON:VED) shed just over 1%.
Australia operating old and base metals focused explorer and developer Thor Mining (LON:THR) led the juniors with a 14% rally.
Banks, insurance, private equity
Barclays (LON:BARC) and HSBC (LON:HSBA) were flat, while Lloyds (LON:LLOY) and Standard Chartered (LON:STAN) lost 1% and Royal Bank of Scotland (LON:RBS) declined 1.5%.
Admiral Group (LON:ADM) and RSA Insurance Group (LON:RSA) posted small gains, while Aviva (LON:AV), Prudential (LON:PRU) and Standard Life (LON:SL) shed less than 1% and Legal & General (LON:LGEN) lost 1.2%, as did Old Mutual (LON:OML).
Private equity group 3i (LON:III) moved down 1%.
Small Cap Movers
Other notable movers among the small caps included supplier of bead and drug eluting bead products Biocompatibles (LON:BII), which gained 7.5%.
Small Cap News
Lipoxen (AIM:LPX) is strengthening its ties with Baxter International (NYSE:BAX) in a US$4 million deal that gives the drugs giant a seat on the board of UK-listed bio-pharmaceutical firm. Under the renegotiated terms of its agreement, Lipoxen will receive a US$2 million licence fee.
Oxford Nutrascience Group PLC (LON:ONG) reported its maiden interims since its successful flotation on AIM in February, showing a strong rise in revenues and good progress in getting its products to market.
Stratex International (LON:STI) announced that channel chip sampling completed across the main Tsemmeti zone extended the bedrock mineralisation at the Shehagne exclusive exploration license in Ethiopia. The mineralisation, which remains open to the southwest, was extended by 440 metres to a total 1,340 metres.
Gulfsands Petroleum (LON:GPX) reported a substantial improvement in its financial performance in H1 2010, while noting that production has increased further since the end of the period. Investors were promised that the next two years are going to be “active and exciting” with Gulfsands looking to the future with enthusiasm and optimism.
Beowulf Mining (LON:BEM) emerged as one of the strongest risers on the LSE today after it announced that initial results from its freshly completed drilling programme on its Kallak iron ore deposit in Sweden indicate a larger than expected iron ore deposit.
Broker Singer Capital Markets said today’s announcement from Lipoxen (LON:LPX) about a revised agreement with Baxter (NYSE:BAX) was “clearly good news”, but stressed the importance of the ongoing trials.
Brokerlink published a research note on Straight (LON:STT), pointing out that the market is not fully appreciating the benefits of the waste and recycling group’s recent acquisitions.
Large and Mid Cap News
Cost cutting and an improvement in the DIY market were the two major factors behind better-than-expected first half results from B&Q owner Kingfisher (LON:KGF) The retailer posted pre-tax profits of £354 million – a rise of 23 per cent. This was around £12 million ahead of analysts’ forecasts.
United Business Media (LON:UBM) said today it is paying US$287 million for trade shows firm Canon Communications. It is buying the business from Spectrum Equity Investors and Appraise Media, and the deal is the biggest of chief executive David Levin’s tenure.
Kesa Electricals PLC (LON:KESA), the electrical retailer that owns Comet, reported better-than-expected sales as it benefited from a World Cup rush to buy flat screen TVs. Underlying sales grew by 4.3 per cent and by more than double the anticipated rate in the three months to July 31.