Overview: the FTSE 100 was sitting 1.5% below the opening level in late afternoon as Chancellor george Osborne was delivering his budget statement, in which he outlined a number of economic severity measures including a two year pay freeze for public sector workers and an increase in VAT (value added tax) from 17.5% to 20% effective January 2011.
In other news, US house prices were reported t have increased by 5% in June compared to an annualised 4.3% rise in May. The Richmond Fed manufacturing index and existing home sales are due out later today.
Hospitality group Whitbread (LON:WTB) emerged atop the leaderboard with a 3.2% advance. Quality and safety services group Intertek (LON:ITRK) followed with a 1.6% gain. No other FTSE 100 constituent added more than 1%.
Oil and gas supermajor BP (LON:BP) was the biggest faller of the day with a 4.5% slide. Sector peer BG Group (LON:BG) followed with a 4.4% decline. Banking group Barclays (LON:BARC), oil and gas producer Cairn Energy (LON:CNE), plumbing and heating equipment manufacturer Wolseley (LON:WOS) and silver miner Fresnillo (LON:FRES) followed with losses of over 3.5%.
The Dow Jones Industrial Average is currently seen slightly below yesterday’s close. Futures for the broader S&P 500 index and the technology heavy NASDAQ composite also point to a lower open.
Commodities
Oil prices were once again moving along with the stock markets today, posting declines late in Monday’s session and early today after nearly reaching US$80/barrel yesterday morning. The change in direction came after the US markets turned negative after surging in the morning and afternoon on news from China, whose central bank said past weekend that it intended to switch to a more flexible exchange rate of national currency yuan. The statement sent markets in Asia, US and Europe flying, yet the rally quickly ran out of gas and the main indexes slipped below the opening levels late in the day.
Goldman Sachs (NYSE:GS) put more pressure on crude today by cutting its forecast for oil prices to US$87/barrel form US$96/barrel.
The euro rose against the US dollar today to provide some support for crude. A weaker US dollar makes dollar denominated commodities such as crude cheaper for holders of other currencies to boost demand.
August Brent Crude slid to US$77.92/barrel, while US light, sweet crude for July delivery declined to US$76.94/barrel on the New York Mercantile Exchange (NYMEX).
Blue chip oil and gas producers were in decline today. BP (LON:BP) shed 3%, while fellow supermajor Shell (LON:RDSB) declined 1.8%. BG Group (LON:BG) and Cairn Energy (LON:CNE) were at the bottom of the pile with losses of 3.9% and 3.6% respectively. Tullow Oil (LON:TLW) fell 2.2%.
Amec (LON:AMEC) was sitting just below the opening level, while another engineering firm Petrofac (LON:PFC) dropped 2%.
Midcaps followed the trend. Dana Petroleum (LON:DNX) lost 3.8%. Premier Oil (LON:PMO) followed with a 3.4% decline. Heritage Oil (LON:HOIL), Melrose Resources (LON:MRS), Salamander Energy (LON:SMDR) and Soco International (LON:SIA) all shed nearly 3%.
Dragon Oil (LON:DGO) moved down 1.6%, while JKX Oil & Gas (LON:JKX) lost just 1.25%.
Services companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) declined 3.3% and 1.7% respectively.
Iraq operating Irish oil company Petrel Resources (AIM: PET) and Africa focused energy company Dominion Petroleum (AIM: DPL) moved along with the majors, slipping 8.% and 5.5% respectively.
Irish oil and gas exploration company Petroceltic International (AIM: PCI) outperformed the sector, advancing 7%.
Gold steady above $1,230, silver and platinum decline
Gold prices were back on the rise today after the markets switched to selling mode following yesterday’s surge that weakened safe haven demands, pushing down gold and other precious metals.
Another round of declines in stock markets boosted safe haven demand, lifting gold to US$1,240/oz before the yellow metal settled at US$1,234/oz. Gold posted new all time highs of US$1,266/oz yesterday.
Silver and platinum declined to US$18.69/oz and US$1,583/oz respectively.
Major mining stocks were in decline. Silver miner Fresnillo (LON:FRES) was at the bottom of the pile with a loss of nearly 4%. Platinum producer Lonmin (LON:LMI) declined 1.7%, while gold miner Randgold Resources (LON:RRS) shed less than 1%.
Specialty chemicals firm Johnson Matthey (LON:JMAT) retreated 1.4%.
Aquarius Platinum (LON:AQP) lost 2.5%, while fellow midcaps silver producer Hochschild Mining (LON:HOC) and gold miner Petropavlovsk (LON:POG) both lost about 2.3%.
UK-registered China operating copper and gold miner Central China Goldfields (AIM: GGG) and Tajikistan operating gold miner Kryso Resources (AIM: KYS) were the top performers in the sector, rallying 9%. Australian gold and copper prospector Solomon Gold (AIM: SOLG) and Turkey focused gold miner Ariana Resources (AIM: AAU) followed, advancing 6% and 5.5% respectively. Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) rose 5%.
Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEFI) and junior diamond producer Stellar Diamonds (LON:STEL) headed in the opposite direction, shedding 5%.
Miners tumble as copper and nickel fall
Base metals declined with copper and nickel moving down to US$2.93/lb and US$8.72/lb respectively, while zinc held steady at US$0.78/lb.
Base metal focused miners were in decline. Kazakhmys (LON:KAZ) and Xstrata (LON:XTA) each slipped 2.8%. BHP Billiton (LON:BLT), Eurasian Natural Resources (LON:ENRC) and Vedanta Resources (LON:VED) all lost just over 2%. Anglo American (LON:AAL), Antofagasta (LON:ANTO) and Rio Tinto (LON:RIO) shed nearly 2%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, sliding 2.3%.
South American focused junior miner Herencia Resources (AIM: HER) and zinc mining and recycling specialist ZincOX (AIM: ZOX) also moved along, slipping 8% and 6.7% respectively.
Banks, insurance, private equity
Financial companies were in decline today. Barclays (LON:BARC) was at the bottom of the banking sector with a 3.7% loss. Royal Bank of Scotland (LON:RBS) shed nearly 2%, while another part-nationalised bank Lloyds (LON:LLOY) lost 1.2%, as did Standard Chartered (LON:STAN). HSBC (LON:HSBA) lost 1.9%.
Aviva (LON:AV) and Legal & General (LON:LGEN) were at the bottom of the insurance sector with losses of 3.4% and 3% respectively. Old Mutual (LON:OML), Prudential (LON:PRU) and Standard Life (LON:SL) retreated 2.5%. Admiral Group (LON:ADM) did better, shedding less than 1%.
Private equity firm 3i (LON:III) declined 2.5%.
Small Cap Movers
Other notable movers among the small caps included epithelial stem cell company EpiStem (LON:EHP), which declined 6.5%.
Small Cap News
In a statement, Sundance Resources (ASX: SDL) said there were no survivors of the crashed plane in West Africa that was carrying its entire board of directors.
Kryso Resources (LON:KYO) told investors that it is now in talks with a major Chinese mining company in relation to a potential investment in the company. Kryso has entered into an exclusivity period, until 11:59pm BST on Friday 25 June 2010, to discuss the potential investment.
Chaarat Gold Holdings (LON:CGH) said that the ongoing drilling programme at its flagship Chaarat gold property in Kyrgyzstan has returned a new set of “encouraging” results with the gold grades reaching 6.74 g/t (grammes per tonne) over 43.5 metres.
Dominion Petroleum (LON:DPL) has spudded the Ngaji-1 well on Block EA4B in Uganda at a location that the company said was best to test the geology of the Lake Edward Basin with the aim of identifying elements of a working petroleum system.
ZOO Digital (LON:ZOO) has seal another significant contract, with a second major Hollywood film studio adopting its media collaboration platform. The company's software platform will allow the film studio to repurpose and reuse content from a variety of media, across multiple formats - from printed materials to on-line content and optical discs.
Novel eco-technology company for human, animal and environmental health TyraTech (LON:TYR) said its revenues in 2009, which it called “a year of development,” rose as product sales nearly tripled, while operating expenses were slashed by 30%.
Alliance Pharma (LON:APH) said that its second largest shareholder Nigel Wray has bought a further 0.8 million shares in the company to up his stake to 11.26% and remain its second largest shareholder behind Chief Executive John Dawson.
In today’s AGM statement, China Shoto (LON:CHNS) warned investors of a 15% year-on-year drop in revenue and profitability during the first 5 months of the year. The company said that China's major telecoms operators have reduced investment in infrastructure projects, which has led to reduced domestic demand for back-up battery products.
Red Rock Resources (LON:RRR) offered its condolences to the family, friends and colleagues of Jupiter Mines' (ASX:JMS) late chairman Geoff Wedlock, who died in a plane crash on Saturday in West Africa. Pallinghurst (JSE:PGL) chairman Brian Gilbertson, has joined the board as a non-executive director and temporarily assumed the position of acting non-executive chairman, to ensure corporate stability and continuity for JMS over this difficult period.
Persian Gold (LON:PNG) is set to expand its asset base with increased diversity in terms of both its resource base and its geographic setting. The company has agreed the terms of a reverse-takeover of un-listed Hydrocarbon Exploration (HyEx), increasing its existing stake in a Ghanaian oil concession and adding interests in Bolivia and the United States.
Large and Mid Cap News
Commercial property company Segro (LON:SGRO) is set to complete the acquisition of BAA’s 50% interest in the latter's joint venture with FTSE 100 insurer Aviva (LON:AV), the Airport Property Partnership (APP), also agreeing to sell assets from its existing portfolio into APP for £237 million.
Airline British Airways (LON:BAY) has reached an agreement with the trustees of its New Airways Pension Scheme (NAPS) and Airways Pension Scheme (APS) on a recovery plan that avoids closing the pension schemes and facilitates the airline’s merger with Spanish peer Iberia.
Business processing company Xchanging (LON:XCH) has signed a letter of intent to form an enterprise partnership with financial and payment system services provider SIA-SSB to acquire 51% of, and assume operational control over, the latter's Italian subsidiary Kedrios S.p.A.
Chemring (LON:CHG) said its revenues for the six months to 30 April rose 10% to £255.9 million as its order book expanded by 16% to £651 million at period-end and offered a positive outlook for the remainder of the year, expecting to see a stronger trading performance and meet full year expectations.