Overview: the FTSE 100 rallied 1.4% today after the US Commerce Department reported an increase of 1.7% in housing starts to an annualised 1.7% in July. However, building permits declined 3.1% to 565,000 in July from 583,000 in the previous month. The Footsie got more support from the mining sector and financial stocks, where most companies managed to end the day with gains.
In other news, UK inflation declined from 3.2% to 3.1% in July, which matched expectations.
Insurer Aviva (LON:AV) led the blue chips with a 4.5% advance. Platinum miner Lonmin (LON:LMI) and insurer Prudential (LON:PRU) followed, climbing 4%. Base metal miners Xstrata (LON:XTA), Eurasian Natural Resources (LON:ENRC) and Kazakhmys (LON:KAZ) climbed 3,5%. Sector peer Antofagasta (LON:ANTO) and engineering firm Invensys (LON:ISYS) added nearly 3%, as did Essar Energy (LON:ESSR).
The world’s largest miner BHP Billiton (LON:BLT) was the heaviest faller in the index with a 3% loss. Oil and gas producer Cairn Energy (LON:CNE) and beverage group Diageo (LON:DGE) declined 1.8% and 1.4% respectively. Power generation company International Power (LON:IPR) and oil and gas supermajor BP (LON:BP) added just over 1%.
US stocks were off to a positive start. The Dow Jones Industrial Average climbed 0.6%, the broader S&P 500 index advanced 0.9% and the technology heavy NASDAQ composite rallied 1%.
Commodities
Crude has been in line for the better part of the last week before reaching five week lows on Monday. The negative trend in oil prices was reversed today as equities and commodities climbed on positive recovery sentiment following yesterday’s update on the Empire State manufacturing index, which improved from 5.08 in July to 7.10 in August. Oil has surged past US$76/barrel and is now in a position to snap the five day losing streak.
Investors are now looking to today’s economic updates, which will include US industrial production, producer price index and housing starts. Inventories reports from the American Petroleum Institute (API) and US Energy Information Administration (EIA) will be released today and on Wednesday respectively.
September Brent Crude climbed to US$76.70/barrel, while US light, sweet crude for September delivery rose to US$76.20/barrel.
Blue chip oil and gas producers were mixed. BP (LON:BP) was sitting just below the opening level, while oil and gas suprmajor Shell (LON:RDSB) did better, advancing 1.7%. BG Group (LON:BG) and Tullow Oil (LON:TLW) climbed 1.4% and 1.9% respectively.
Cairn Energy (LON:CNE) lost 1.6%.
Oil and gas engineering firms did better with Amec (LON:AMEC) and Petrofac (LON:PFC) advancing 1.8% and 3.4%.
Midcaps didn’t show much movement. Dana Petroleum (LON:DNX), Dragon Oil (LON:DGO), JKX Oil & Gas (LON:JKX) and Melrose Resources (LON:MRS) added less than 1%, while Heritage Oil (LON:HOIL) and Salamander Energy (LON:SMDR) declined marginally.
Premier Oil (LON:PMO) was deeper in the red with a 1.6% loss.
Wellstream Holdings (LON:WSM) posted a gain of less than 1%. Another services company Wood Group (LON:WG) did better, rising 1.6%.
Africa focused energy company Dominion Petroleum (LON:DPL) led the juniors with a 16.5% rally. Iraq operating Irish oil company Petrel Resources (LON:PET) followed with an 8% gain.
Energy investor Xtract Energy PLC (LON:XTR) headed in the opposite direction, shedding 14%. US focused oil and gas junior Caza Oil & Gas (LON:CAZA) and Atlantic Canada operating oil and gas group Enegi Oil (LON:ENEG) declined 8% and 6.5% respectively.
Gold holds steady at $1,225
Safe haven demand was strong enough to support gold above the US$1,225/oz level today despite a positive trend in global equity markets.
Yesterday’s update on the Empire State manufacturing index was positive, showing an increase from 5.08 in July to 7.10 in August to inspire optimism in the markets. However, Japan said its GDP slowed to 0.4% in Q2 to reinforce concerns about the strength of the ongoing economic recovery, which translated into higher demand for gold.
The yellow metal was supported by last week’s statements from the Federal Reserve and the Bank of England (BoE), which left their interest rates unchanged. The Fed said it would start buying US bonds to support the economy, while BoE governor Mervyn King predicted the recovery to be “choppy.”
The low interest rates have also contributed to the strength in gold, which is also used as an inflation hedge.
Holdings in the world’s largest gold-backed exchange traded fund SPDR Gold Trust (NYSE:GLD) were unchanged at 1,286.7 metric tones.
Gold stood at US$1,226/oz in late afternoon. Silver and platinum advanced to US$18.60/oz and US$1,539/oz respectively.
Major mining stocks were on the rise today. Gold miner Randgold Resources (LON:RRS), silver miner Fresnillo (LON:FRES) and platinum miner Lonmin (LON:LMI) rose 1.1%, 2.6% and 4.5% respectively.
African Barrick Gold (LON:ABG) followed with a small gain.
Specialty chemicals firm Johnson Matthey (LON:JMAT) surged 3.2%.
Midcaps followed. Gold miner Petropavlovsk (LON:POG) rallied 5%, while Aquarius Platinum (LON:AQP) and silver producer Hochschild Mining (LON:HOC) climbed 3.7% and 1.5%.
Junior diamond producer Stellar Diamonds (LON:STEL) slipped 10%.
Western Australia operating Norseman Gold (LON:NGL) was among the top performers in the sector with an 8% climb.
Base metals rise to boost miners
Copper and nickel climbed to US$3.33/lb and US$9.92/lb, while zinc reached US$0.95/lb.
Eurasian Natural Resources (LON:ENRC), Kazakhmys (LON:KAZ) and Xstrata (LON:XTA) led the mining companies with gains of over 3.5%. Antofagasta (LON:ANTO) added just over 3.4%.
Rio Tinto (LON:RIO) and Vedanta Resources (LON:VED) rose 2.5%. Anglo American (LON:AAL) tacked on nearly 1%.
BHP Billiton (LON:BLT) went against the tide, sliding 3%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) advanced 1.5%.
Junior companies weren’t very active today. Australia focused coking coal producer Caledon Resources (LON:CDN) was an exception with a 5% gain. Specialty minerals exploration and development company Thor Mining (LON:THR) headed in the opposite direction, slipping 7.5%.
Banks, insurance private equity
Standard Chartered (LON:STAN) led the banking sector with a 2.3% climb. Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS) added 2%. HSBC (LON:HSBA) and Lloyds (LON:LLOY) tacked on 1.6% and 1% respectively.
Aviva (LON:AV) and Prudential (LON:PRU) were the top performing insurance companies with gains of over 4%. Old Mutual (LON:OML) and Legal & General (LON:LGEN) followed, tacking on 2.6% and 1.6% respectively. Admiral Group (LON:ADM) and Standard Life (LON:SL) moved up 1%.
Private equity group 3i (LON:III) climbed 1.6%.
Small Cap Movers
Other notable movers among the small caps included African Medical Investments (LON:AMEI), which lost 8.5% and novel eco-technology company for human, animal and environmental health TyraTech (LON:TYR) with a 10% rally.
Small Cap News
African Medical Investments (LON:AMEI) said it has ended the management contract covering its medical and vaccination centre at Johannesburg International Airport as it confirmed its probe into financial irregularities continues.
African Medical Investments (LON:AMEI) said it has ended the management contract covering its medical and vaccination centre at Johannesburg International Airport as it confirmed its probe into financial irregularities continues.
The newly enlarged Horizonte Minerals (LON:HZM) began trading on London’s AIM market this morning, after it completed the acquisition of Teck Resources’ (TSX:TCK) Brazilian nickel business. Teck Brazil’s primary asset was the advanced Araguaia nickel project, which is located in the Carajás mineral district of northern Brazil.
Thailand focused oil and gas explorer and producer Coastal Energy Co (LON:CEO) has said its Bua Ban A-06 well has encountered 40 ft (feet) of net pay with 17.5% porosity in the Lower Oligocene reservoir and is currently producing 800 barrels of oil per day.
Zimbabwe operating gold miner Central African Gold (LON:CAN) took note of the third quarter report released by its 88.6% owner New Dawn Mining Corp (TSX:ND), which was now targeting 50,000 to 60,000 oz (ounces) of consolidated annualized gold production within 18 to 24 months following the acquisition of CAG. New Dawn said it was taking care of the issues that negatively impacted production and is set to achieve improvements in both production and costs after buying CAG.
Many investors in Lo-Q (LON:LOQ) will have been pleased to see strong first-half results from one of Lo-Q’s principal associates, the US theme park operator Six Flag Entertainment Corp (NYSE:SIX). According to Six Flags, 9.5 million customers visited its 19 theme parks, representing a 6% increase in visitors compared with H109.
Pursuit Dynamics (LON:PDX) has signed a contract for its Generation One corn-based bio-fuels business and will now install its Ethanol Reactor System (ERS) at the Madrid, Nebraska plant of Mid America Bio Energy & Commodities (MABE).
Scotgold Resources (LON:SGZ, ASX:SGZ) reported fresh drilling and sampling results from its ongoing gold and silver exploration in the Beinn Udlaidh area in the Scottish Highlands, including gold grades of up to 383.8 g/t (grammes per tonne) and silver grades of up to 167 g/t, which confirmed the vein extension.
In its interim statement, Dublin-listed building materials supplier Readymix stated that already “exceptionally challenging” trading conditions experienced in 2009 have deteriorated further in 2010, causing its revenues to plummet 30% year on year, in line with the “exceptional weakness” across the construction markets.
Regenersis (LON:RGS) has won a contract from LG to deliver a 50-seat customer care centre in the UK, expected to handle more than half a million enquiries per year.
Since May, Baobab Resources’ (LON:BAO) drilling at the Chimbala prospect, on the Tete project in Mozambique, has potentially added 225.7Mt at 26.8% Fe, to the officially declared JORC resource of 47.7Mt at 25.3% Fe, according to analysis by Edison Investment Research.
Premier Oil PLC (LON:PMO) said the 22/19c-6 well on on the Oates prospect in the UK Central North Sea encountered no hydrocarbons and will be plugged and abandoned.
Noventa (LON:NVTA) is set to receive an VAT rebate of US$895,000, following an extensive search to find missing invoices and export certificates, which were lost by the company’s previous management. The company also had to undertake “lengthy negotiations” with the tax authorities in Mozambique.
Large and Mid Cap News
Support services group Carillion PLC (LON:CLLN) said it has been awarded a five-year extension to its existing contracts with EDF Energy Networks, worth £40 million per annum.
The Pennon Group (LON:PNN) said that its water utility business, South West Water, has a “solid platform” for continued success in the K5 regulatory period (2010 - 2015), after a successful K4 (2005-2010). In a trading update this morning Pennon told investors that it has been trading inline with expectations, in the period since 31 March 2010.
FTSE250 mezzanine finance specialist Intermediate Capital Group (LON:ICP) (ICG) is set to acquire a €1.4bn portfolio of European loans from the Royal Bank of Scotland (LON:RBS). The company said the deal is contributes to its strategy to grow as a “leading global alternative asset manager".
Regenersis (LON:RGS) has won a contract from LG to deliver a 50-seat customer care centre in the UK, expected to handle more than half a million enquiries per year.
The world’s largest diversified mining group, BHP Billiton (LON:BLT, ASX:BHP, NYSE:BHP & BBL) received a stiff rebuttal of its proposed US$38 billion (£24 billion) offer for the world`s largest potash miner, Saskatchewan’s Potash Corp (TSX:POT, NYSE:POT) this morning, but this is likely to be just the beginning of the story rather than the end.