The party is clearly over for the banks, which heavily benefitted from the encouraging results released by majors earlier this week and Bank of England’s statements that the recession is worse than previously thought and recovery would be lengthy, simultaneously announcing a £50 billion injection into the economy. Banks soared, led by the partly nationalised Lloyds which added over 10%. Yet this morning the financials gave up most of yesterday’s gains with RBS showing the way with a 12% retreat following the release of interim results, which contained some gloomy predictions for the midterm and reported £7.5 billion in bad debts written off in H1.
Slumping metal prices have undermined the mining sector, pushing it further down on the heels of yesterday’s downfall with all key players losing value and dragging the Footsie down. The top losers list was stacked with miners by midday, with them accounting for the bulk of the FTSE 100’s 50 point drop.
The US stocks also closed with losses on Thursday, further contributing to the Footsie’s morning demise.
Against this backdrop, defensive stocks, primarily the utility companies, caught fire as Pennon Group (LSE: PNN), United Utilities (LSE: UU), Northumbrian Water Group (LSE: NWG) and Severn Trent (LSE: SVT) all managed to stay afloat and even posted gains in excess of 1%. Mobile operator Vodafone (LSE: VOD) also rose, adding 1.5%. Oil stocks opened in the blue, albeit barely.
Publisher Pearson (LSE: PSON), which is still riding momentum after announcing better than expected interim profits in late July, was the leading riser with a gain of just 1.9%.
The outlook for the rest of the day remains mixed. The market awaits US payroll data, which is due to arrive in the afternoon and set the source for the market for the rest of the day. As of right now, forecasts predict better job numbers for July than in the previous month.
The FTSE 100 has already erased the gains it made on Thursday, when it reached 10 month highs.
Commodities
Oil didn’t move by much, while metals mostly declined, contributing to the mining sector’s fall.
Gold dipped below US$960/ounce, standing at US$959/ounce at midday. Other precious metals were mixed. Silver was once again volatile, moving up to US$14.61/ounce after falling from over US$14.70/ounce yesterday. Platinum continued retreat, slipping to US$1,234/ounce.
Base metals didn’t do much better. Copper declined to US$2.68/pound, Zinc slipped marginally, standing at US$0.81/pound. Nickel’s freefall carried on with further losses pushing it down to US$8.65/pound.
Oil and gas sector: majors steady, midcaps and juniors slide
The oil sector was on the defensive today, slightly improving its positions after slumping for most of the week. BP (LSE: BP) and Shell (LSE: RDSB) both added 1%, but oil and gas player BG Group (LSE: BG) marginally declined.
Brent crude was at US$74 per barrel marking a US$0.40 decline from yesterday, while NYMEX crude remained slightly above US$71.
Mid-tier oil companies didn’t fare as well as the majors. Cairn Energy (LSE: CNE) was down 2.9%, while Tullow Oil (LSE: TLW) declined 2% as did Dragon Oil (LSE: DGO). Dana Petroleum (LSE: DNX) slid 1.8%.
Oil juniors fell into the same pattern. Max Petroleum (LSE: MXP) declined for the second day in a row, this time by 2%. Ukraine focused gas producer, Regal Petroleum (AIM: RPT) shed over 3%. Gulf Keystone Petroleum (AIM: GKP) went against the tide with a 4.5% improvement after doubling its value on Thursday in the wake of its announcement of an oil discovery in Kurdistan. Gulfsands Petroleum (AIM: GPX) retreated 1.4%.
Victoria Oil & Gas (AIM: VOG) outperformed most juniors, rising 2.7%. Rome-based Mediterranean Oil & Gas (AIM: MOG) dipped 1.1%.
Northern Petroleum (AIM: NOP) and Petrel Resources (AIM: PET) both climbed 1%.
Precious Metal Companies fall
Precious metal companies were among the steepest fallers, as the substantial slump in metal prices took a toll on their stock. Platinum producers suffered the most. Aquarius Platinum (LSE: AQP) slipped over 7.5% to 263p per share. Johnson Matthey (LSE: JMAT) was down 3%, while Lonmin (LSE: LMI) retreated 5.8%.
Junior platinum producer Braemore Resources (AIM: BRR) retreated 2% following a 10% decline on Thursday.
Gold producers followed with their own losses. Peter Hambro Mining (LSE: POG) and Randgold Resources (LSE: RRS) opened in the red, shedding 4% and 2.8% respectively.
Silver producer and FTSE 100 constituent Fresnillo (LSE: FRES) and FTSE 250 silver miner Hochschild Mining (LSE: HOC) both dipped 4%.
Noteworthy movers among juniors included Oxus Gold (AIM: OXS) with a 6.5% drop, which erased yesterday’s gains and Cluff Gold (AIM: CLF), which also eliminated Thursday’s advances with a 3.5% decline. Norseman Gold (AIM: NGL) was 2.8% in the red.
Unlike its peers, copper and gold focused junior, EMED Mining (AIM: EMED) continued gains, rising 4.2%.
Firestone Diamonds (AIM: FDI) lost 3.8%.
Base metal miners again in decline
Majors Anglo American (LSE: AAL), Rio Tinto (LSE: RIO) and BHP Billiton (LSE: BLT) all were on the losing side in the morning, dipping 3.5%, 4.5% and 2.7% respectively. Xstrata (LSE: XTA) joined in with a 4.6% slide.
Junior coal miner Caledon Resources (AIM: CDN) climbed 4.2% today after saying it has not reached any takeover agreements with any company, however it confirmed it has been approached by several companies, including Essar Minerals Ltd.
Mineral sands producer Kenmare Resources (LSE: KMR) rallied 5.9%, while nickel and iron ore exploration junior Landore Resources (LSE: LND) was up 4.1%.
Copper miners followed the trail. Vedanta Resources (LSE: VED), Antofagasta (LSE: ANTO) and Kazakhmys (LSE: KAZ) slipped 4.9%, 1.7% and 3.2% respectively. First Quantum Minerals (LSE & TSX: FQM) held steady.
London’s only listed pure iron ore producer, Ferrexpo (LSE: FXPO) lost 4% in the morning.
Junior zinc miner Connemara Mining (AIM: CON) shed 7.8%, while shares in junior miner Noventa (AIM: NVTA), jumped 6% following a retreat of almost 10% on Thursday.
Uranium and copper explorer Kalahari Minerals (AIM: KAH) progressed again, adding slightly less than 1%. Laterite nickel specialist, European Nickel (AIM: ENK) went in the same direction as the rest of the market, dipping 3.5%.
Metals Exploration (AIM: MTL) also was in decline, pulling back 1.7%.
Insurance, banks, private equity
Things couldn’t get much worse for the financials despite yesterday’s update from the Bank of England. The 70% nationalised RBS, which released its report, which the bank itself labelled as “poor” and said the situation wasn’t likely to improve until 2011, led the decline as others followed.
Lloyds (LSE: LLOY), HSBC (LSE: HSBA) and Barclays (LSE: BARC) headed south, moving down 6.4%, 3.3% and 3.9% respectively, while Standard Chartered (LSE: STAN) slipped just below 1%.
Insurers were also downbeat in the morning. Aviva (LSE: AV) gave up half of Thursday’s gains, sliding 3.5%. RSA Insurance Group (LSE: RSA), Old Mutual (LSE: OML) and UK’s fourth biggest life insurer Standard Life (LSE: SL) dipped 1%, 5.6% and 0.7% respectively. Legal & General (LSE: LGEN) and Prudential (LSE: PRU) joined in with losses of 3% and 3.6% respectively.
Large Cap News
Royal Bank of Scotland Group (LSE: RBS) closed the big reporting week for the banking sector today with its interim results, following other majors Lloyds (LSE: LLOY), HSBC (LSE: HSBA) and Barclays (LSE: BARC). Like its peers, RBS reported high bad debts, but said the bad results will likely keep coming for awhile.
The bank’s bad debts soared as the group reported £7.5 billion in impairments, yet it posted a pre-tax profit of £15 million after reporting losses in excess of £726 million in H1 2008. The group’s investment banking business accounted for most of the profits with a £5 billion profit.
TSE 250 infrastructure focused investment company HSBC Infrastructure Company Limited (HICL) (LSE: HICL) said its portfolio was not affected by the economic downturn and continued performing “satisfactorily.”
The company, which raised £250 million through its IPO in 2006 to acquire 15 infrastructure projects, said it issued 17.585 million shares in June and July, raking in a total of £19.2 million. The funds helped HICL proceed with acquisitions and buy a 30% stake in the Renfrewshite Schools project worth £6.8 million and a 50% interest in the second Highland Schools PPP project for £16.8 million.
Lloyd’s of London insurer and FTSE 250 constituent Catlin Group Limited (LSE: CGL) reported record interim figures today, getting a lot of help from investments in the US and surging insurance prices.
The group said pre-tax profits for the six months ended 30 June increased to new highs, hitting US$240 million, up 60% year on year and well ahead of the expectations of under US$200 million, while net income tacked on 77%, surging to 196 million, also a record number for Catlin.
Small Cap News
Neovia Financial (LSE: NEO), the online payments specialist, said in a trading statement that first half results for the 2009 financial year were in line with market expectations. Neovia Financial moves and manages billions of dollars for consumers and merchants in over 160 countries, making it one of the leading independent online payments businesses.
Quarter-on-quarter active customers grow by 3% in the second quarter, which the company described as “encouraging” considering the wider turmoil in the global economy. The company also reported that a quarter-on-quarter improvement in gross margins, though margins are below the compared first half in 2008. Overall, Neovia Financial said that 2009 had got off to a “promising start”.
Australian coal producer Caledon Resources PLC (AIM: CDN, ASX: CCD) has confirmed it received approaches from Essar Minerals Ltd and other parties which may or may not lead to a cash offer for the company.
Caledon had only yesterday noted speculation in the Indian media regarding a potential bid for the company by the Essar group, but neither confirmed or denied it. It had reiterated it has been involved in discussions with a number of parties over possible offers but that there had been no agreement with any party.
Phaunos Timber Fund Ltd (LSE: PTF) said its Uruguayan unit Pradera Roja has acquired two properties called San Pedro and Tupambae II for an undisclosed figure. San Pedro encompasses over 1,600 hectares, and Tupambae II encompasses over 300 hectares, both in Cerro Largo.
The land will be developed as a eucalyptus plantation for both the fiber and sawn wood markets.
Lombard Medical Technologies PLC (AIM: LMT) reported narrowing losses and rising sales for the first half and said it is looking at raising more funds to sustain the business from when the current cash runs out in early 2010 to when it becomes cash generative.
Revenue in the period rose to £1.25 million from £855,000 a year earlier and pretax loss narrowed to £4.35 million from £5.1 million.