Overview: the FTSE 100 was in decline today with a 0.4% loss despite the positive data that came out in the US yesterday and a note from Morgan Stanley (NYSE: MS), which today set a 5,800 point year end target for the UK’s blue chips index to help the Footsie curb losses. Helping out was today's US pending home sales update, which showed a 22.4% jump in April.
Caterer Compass Group (LSE: CPG) led the blue chips with a 4.4% gain. Pharmaceutical company Shire (LSE: SHP), fashion house Burberry (LSE: BRBY) and Imperial Tobacco Group (LSE: IMT) added more than 2.5%. Temporary power provider Aggreko (LSE: AGK), telecom company Cable & Wireless Worldwide (LSE: CW) and silver miner Fresnillo (LSE: FRES) tacked on over 2%. Other pharmaceutical stocks GlaxoSmithKline (LSE: GSK) and AstraZeneca (LSE: AZN) climbed 1.6% and 1.2% respectively.
National Grid (LSE: NG) and bank RBS (LSE: RBS) were at the bottom of the pile with declines of 3.5%. Other notable fallers included mobile operator Vodafone (LSE: VOD) and retailer Marks & Spencer (LSE: MKS), which lost more than 2.5%.
US rallied in early trade. The Dow Jones Industrial Average added 0.6%, while the broader S&P 500 index climbed 0.8% and the technology heavy NASDAQ composite rose 0.9%.
Commodities
Crude prices recouped some of their losses today, though failed to recover completely despite a batch of positive US data that was released on Tuesday. The ISM (Institute of Supply Management) PMI (purchasing manager’s index) reflecting industrial activity in the US declined from 60.4 to 59.7 in May, which still indicated growth and was higher than expected. At the same time, construction spending was reported to have risen by 2.7% in April.
However, the news from China, whose PMI declined from 55.7 to 53.9 in May, offset the positive impact of the US figured and weighed on crude and other commodity prices, raising concerns that the Chinese economic growth, which was the main force supporting commodity prices during the economic downturn, may be slowing. China is the world’s second largest energy consumer behind the US.
July Brent Crude slid to US$72.95/barrel, while US light, sweet crude for July delivery retreated to US$72.40/barrel.
Blue chip oil and gas producers were in decline today. BP (LSE: BP), which has failed to plug the oil leak in the Gulf of Mexico, shed another 2.3%, while fellow supermajor Shell (LSE: RDSB) lost less than 1%, as did Tullow Oil (LSE: TLW). BG Group (LSE: BG) and Cairn Energy (LSE: CNE) retreated 2.8% and 2.3% respectively.
Engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) both lost 1.3%.
Midcaps followed with the sole exception of Melrose Resources (LSE: MRS), which posted a small gain. Dragon Oil (LSE: DGO), Salamander Energy (LSE: SMDR) and Premier Oil (LSE: PMO) declined 3%, 2.8% and 2% respectively. Dana Petroleum (LSE: DNX) and JKX Oil & Gas (LSE: JKX) shed a little over 1%. Heritage Oil (LSE: HOIL) and Soco International (LSE: SIA) posted marginal losses.
Service companies followed with Wood Group (LSE: WG) and Wellsream Holdings (LSE: WSM) retreated 4.1% and 2.7% respectively.
US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) led the small caps for the second day in a row, surging 24%. Ukraine focused gas producer, Regal Petroleum (AIM: RPT) headed in the opposite direction, shedding 5%.
Gold returns to $1,220
Gold prices recovered late in the afternoon, climbing to US$1,220/oz after sliding to US$1,217/oz following a surge that put the yellow metal to nearly US$1,230/oz on increased safe-haven buying. Investors were pouring money into gold amid declined in stock markets and mixed data that came out in the US yesterday.
Other precious metals also declined with silver and platinum sliding to US$18.17/oz and US$1,536/oz respectively.
Major mining stocks were mixed. Randgold Resources (LSE: RRS) and platinum miner Lonmin (LSE: LMI) shed just over 1%. Silver miner Frensillo (LSE: FRES) climbed 1%.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) posted a marginal loss.
Gold miner Petropavlovsk (LSE: POG) did well with a gain of nearly 1%. Aquarius Platinum (LSE: AQP) was in the red with a 1.5% loss, as was silver producer Hochschild Mining (LSE: HOC), which shed less than 1%.
UK-registered China operating copper and gold miner Central China Goldfields (AIM: GGG) was the top performer among the small caps with a 35% rally. Africa operating gold miner GMA Resources (AIM: GMA) followed, climbing 6.5%, while Canada based junior gold developer Rambler Metals and Mining Plc (AIM: RMM) climbed 5%.
Africa focused gold deposit developer Cluff Gold (AIM: CLF) slipped 10%.
Copper and nickel fall to weaken miners
Base metals once again were in decline. Copper and nickel slid to US$2.99/lb and US$8.80/lb, while zinc retreated to US$0.79/lb.
Major mining stocks declined on lower metal prices. Anglo American (LSE: AAL) was at the bottom of the pile, shedding 2.3%. BHP Billiton (LSE: BLT), Eurasian Natural Resources (LSE: ENRC), Kazakhmys (LSE: KAZ) and Xstrata (LSE: XTA) all shed slightly more than 1%. Antofagasta (LSE: ANTO) and Vedanta Resources (LSE: VED) lost nearly 1%, while Rio Tinto (LSE: RIO) posted a small loss.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, slipping 2.5%.
Junior companies didn’t show much movement today. Botswana operating nickel and copper miner Discovery Metals (AIM: DME) and Philippines operating nickel miner Rusina Mining (ASX: RML; AIM: RMLA) lost 5%.
Banks, insurance, private equity
Most financial stocks were in the red today. Part-nationalised Royal Bank of Scotland (LSE: RBS) and Lloyds (LSE: LLOY) were the leading fallers among the banks with losses of 3.5% and 3% respectively. Barclays (LSE: BARC) also shed 3%. HSBC (LSE: HSBA) and Standard Chartered (LSE: STAN) posted losses of less than 1%.
Old Mutual (LSE: OML) posted a small gain to become the only insurance company to stay above the opening level. Admiral Group (LSE: ADM), Aviva (LSE: AV), RSA insurance Group (LSE: RSA) and Standard Life (LSE: SL) lost almost 1%. Legal & General (LSE: LGEN) and Prudential (LSE: PRU) declined 2.1% and 2.8% respectively.
Private equity group 3i (LSE: III) was sitting just below the opening level.
Small cap movers
Other notable movers among the small caps included speciality biopharmaceutical company Lipoxen (AIM: LPX), which rallied 8%.
Large and Mid Cap News
Retail and investment banking giant Barclays (LON:BARC) is snapping up Stockholm listed carbon trader Tricorona AB for £98 million in cash.
Prudential (LSE:PRU) confirmed it had entered into negotiations to terminate its proposed acquisition of AIG’s Asian unit. The price tag for Prudential to exit the deal stands at a whopping £450 million, which includes a break fee of £152.5 million.
Small Cap News
Old Park Lane Capital has initiated coverage of Range Resources (ASX: RRS, AIM: RRL), praising its “highly attractive spread of exposure” to frontier exploration and stating that the value of just one of its wells alone underpinned the current market value of the company, which could develop into a major player in the E&P (exploration and production) sector.
Invocas Group (LON:INVO) has announced that it no longer desires to be listed on AIM, blaming its decision on the combination of low liquidity in its shares and the high cost to maintain its status as a PLC.
Caza Oil and Gas (AIM: CAZA, TSX: CAZ) has farmed-out a portion of its 65% working interest in the Bongo Prospect in Texas, to two partners - Verus Investments and Singular Oil & Gas. Subsequently, on completion, Caza will retain a 40% working interest in the Bongo project.
Central China Goldfields (LON:GGG), alongside its JV partner Auzex Resources told investors that the independent structural study of the Bullabulling Gold Project has now been completed. The partners will now start the next phase of diamond drilling imminently.
Mediterranean Oil & Gas (LON:MOG) told investors that it has extended its €18 million credit facility with the Bank of Scotland, until 2nd September 2011. The extension allows the company to support its 20% interest in the development of the ENI-operated Guendalina offshore gas field in the Adriatic Sea.
South American based explorer Mariana Resources (LON:MARL) has reported further wide intersections from 19 drill holes at the Calandria Sur prospect, saying the bulk tonnage potential, bonanza gold grades from Calandria Norte and additional targets at El Nido dome complex enhanced the scope to expand the Las Calandrias project.
Plant Impact (LON:PIM) has signed a distribution agreement for its InCa calcium delivery product, with Arysta LifeScience’s Mexico-based subsidiary. The 10-year deal gives Arysta exclusive distribution rights for sales and marketing of InCa in Mexico, Guatemala, Costa Rica, El Salvador, Honduras, Dominican Republic, Panama, Belize and parts of the Caribbean.
Managed hosting and cloud computing services company iomart (LON:IOM) declared it was now more established with more recognition of its presence in the market after its revenues for the year to 31 March jumped 55% to help it swing to profits of £3.1 million after making a loss of £0.3 million last year, while also announcing a new £10 million acquisition facility from Lloyds Banking Group (LON:LLOY) that demonstrated its “appetite for growth.”
The merger between European Nickel (LON:ENK) and Rusina Mining (LON:RMLA, ASX: RML) took another step forward today, as Rusina shareholders approved the scheme of arrangement by an overwhelming majority – with 99.56% voting in favour of the deal.
Antennas manufacturer Sarantel Group (LON:SLG) has signed a letter of intent with Elcoteq SE to outsource its assembly, test and supply chain processes, expecting to generate savings of £0.5 million.
TEG Group (LON:TEG) has agreed to acquire six composting sites of Midlands Simpro for up to £6 million after raising £6.8 million via a share issue to fund the deal, which will boost the number of its operating sites in the UK to ten and increase processing capacity from 115,000 tpa (tonnes per annum) to 295,000 tpa.
West Africa focused oil and gas explorer and producer Afren (LSE:AFR) is has entered into an agreement to acquire Toronto Venture listed Black Marlin (TSX-V:BLM) in an all share deal valued at CDN$106 million.
Falkland island focused oil explorer, Rockhopper Exploration (LON:RKH) told investors that it is not aware of any reason for the significant decline in its share price. After closing Tuesday’s session at 269.25p per share, the company’s share fell sharply this morning, reaching an intraday low of 110p.