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Market:	ASX
Sector:	Media
Epic:	.
News:	Latest news
Web Site:	Proactive Investors Australia
Other Articles:	11-08-201006-08-201005-08-2010

Energy sector climbs on higher prices, FTSE 100 inches closer to 4,700

The FTSE 100 opened strong and remained in the blue for the whole day, closing up over 70 points. The market received a boost from both the banking sector, which was encouraged by today’s reports from Barclays (LSE: BARC) and HSBC (LSE: HSBA), while all other key players also posted gains, and the miners, whose rally was fuelled by the growing base and precious metal prices, which continued on Monday following last week’s good gains.

 

The index was led by oil and gas group Petrofac (LSE: PFC) which outstripped the miners’ gains with a 10% rally following an upgrade from UBS, which changed the company’s rating to “buy” from “neutral,” simultaneously lifting its price target to £10 from £6.1.

 

Packaging group Rexam also chimed in with a 2% gain after announcing the shutdown of its plant in Dmitrov, Russia, reducing its can making capacity by 1.3 billion tonnes, but helping itself to savings in excess of £6 million in 2010.

 

The fallers were led by retailer Marks & Spencer (LSE: MKS), BT Group (LSE: BT), which is still in decline after posting profit losses and flat revenue for Q2 2009 last week, and satellite broadcaster BSkyB (LSE: BSY), which surged last week after reporting better profits and good demand for HD TV, which helped the group lure subscribers at the faster rate in 5 years.

 

The broadcasting company led the losers group throughout the day later joined by tobacco companies Imperial Tobacco (LSE: IMT) and British American Tobacco (LSE: BATS) both of which were on decline, shedding 2.2% and 1.6% respectively. SABmiller (LSE: SAB) also inched closer to the bottom with a 1.7% slip after reporting Q2 results for its joint venture with Molson Coors Brewing Co (NYSE: TAP) MillerCoors, which posted double digit profits, but reports a decline in sales volumes, which were setoff by higher per barrel revenue stemming from reduced discounts. Supermarket group Sainsbury’s (LSE: SBRY) was also among the companies on the losing side today, moving down 2%.

 

However, none of the losses put up by the top-tier companies were very steep - BSkyB (LSE: BSY) led with a 2.4% decline at the end of the day.

 

Among other news to impact the market was an update from the National Housing Federation (‘NHF’), which released its projection for housing prices today, saying the market is in for strong growth.  The NHF expects house prices to jump 20% between 2012 and 2014, owing to the shortage of properties, saying the current annual number of built homes covers only 60% of the demand, which will cause the shortage and drive the prices up. Yet it expects prices to head south in near term, slipping 12.2% this year and 4.6% next year before starting to make headway in 2011.

 

The market’s response was generally positive as FTSE 250 builders Barratt Developments (BDEV) and Travis Perkins (LSE: TPK) both added 2.8%, while peer Redrow (LSE: RDW) gained 2.3%. FTSE 100 construction materials supplier Wolseley (LSE: WOS) also tacked on 2.3%.

 

Boosted by another strong performance from European and Asian indices, US stocks also jumped when trading commenced in the morning.

 

Commodities

 

Gold progressed to US$954 in the morning and didn’t stop there, climbing to US$960/ounce by the end of the day. Other precious metals followed the trail. Silver cleared the US$14 mark and stood at US$14.41 at midday, while Platinum improved to US$ 1221/ounce.

 

Base metals fell into the same pattern. Copper continued gains, improving to US$2.70/pound, Zinc also reached a new milestone, surging to US$0.81/pound, while Nickel added 37 cents arriving at US$8.43/pound by midday.

 

Oil and gas sector bounces back from Friday’s losses

 

Oil supermajor BP (LSE: BP) rallied 2.2% after dipping on bad news from oil companies ENI and Total on Friday along with the rest of the sector. Shell (LSE: RDSB) was flat in the morning and finished with small gains on Monday.

 

Oil and gas player BG Group (LSE: BG) pulled together after falling on its announcement last Friday that it would fail to meet production targets. Shares in BG Group rebounded 4% on Monday.

 

The surge was complimented by the oil price, which improved on positive US sentiment about demand and recovery expectations for the world’s largest economy. Brent spot crude flirted with US$73 per barrel, while NYMEX crude passed the US$70/barrel mark to US$71.60.

 

Mid-tier oil companies responded well; Cairn Energy (LSE: CNE) rose 1.9%, Dragon Oil (LSE: DGO) retreated after early gains, adding just 0.6%, while Dana Petroleum (LSE: DNX) surged 3.7%.

 

Oil juniors also basked in the sun today. Victoria Oil & Gas (LSE: VOG) climbed 4%, while Italian gas producer, Mediterranean Oil & Gas (AIM: MOG) rallied 3.4%. US focused junior, Empyrean Energy (AIM: EME) surged 12%.  Middle East and Gulf of Mexico Oil & Gas producer Gulfsands Petroleum (AIM: GPX) climbed 3.8%, but later lost its early gains to finish slightly above the opening level. European focused Northern Petroleum (AIM: NOP) and Iraq focused Petrel Resources (AIM: PET) climbed 4.2% and 1.5% respectively.

 

Precious Metal Companies climb on surging prices

 

Aquarius Platinum (LSE: AQP) rose 6.9% to 278p after slipping on fourth quarter production results last week. Johnson Matthey (LSE: JMAT) slid 1.3%, while Lonmin (LSE: LMI) added 2.7%.

 

Gold producers were mostly on the rise, fuelled by the rising gold prices. Peter Hambro Mining (LSE: POG) and Randgold Resources (LSE: RRS) improved 3.3% and 5.7% respectively.

 

Silver producer and FTSE 100 constituent Fresnillo (LSE: FRES) improved 3% to 643p, while FTSE 250 silver miner Hochschild Mining (LSE: HOC) again added 8.9%, following an smaller gain on Friday.

 

Junior Gold companies were largely positive too. Oxus Gold (AIM: OXS) added 6.4%, Cluff Gold (TSX & AIM: CLF) tacked on 1.8%, Medusa Mining (AIM & ASX: MML) rose 3.8%, while copper and gold focused juniors, including EMED Mining (AIM: EMED) and Frontier Mining (AIM: FML) also rose strongly, up 7.7% and 28% respectively. Metals Exploration (AIM: MTL), which is developing a gold-molybdenum project, managed to outperform most of its peers, adding 13.7%. Gold and Silver exploration junior Mariana Resources (AIM: MARL) added 2.3% to erase Friday’s losses. The company reported last week that it had identified seven new gold-silver targets at one of its projects in Argentina.

 

Base metal miners climb

 

Majors Anglo American (LSE: AAL), BHP Billiton (LSE: BLT) and Rio Tinto (LSE: RIO) all improved, rising 3.8%, 4.1% and 5.4% respectively.

 

Copper miners followed roughly the same path as the rest of the sector. Vedanta Resources (LSE: VED) gained 5.3%, while Antofagasta (LSE: ANTO) surged 5.9%. Kazakhmys (LSE: KAZ) was among the leaders in the top tier index today, rising 9.2%. First Quantum Minerals (LSE & TSX: FQM) headed south, shedding 2%.

 

London’ only listed pure iron ore producer, Ferrexpo (LSE: FXPO) jumped 10%.  Nickel and iron ore exploration juniors, Landore Resources (LSE: LND) rose 3.2% on positive exploration news from its project in Canada.

 

Insurance, banks, private equity rise

 

This is a big week for the banking sector with all the major banks set to release first half results. Barclays and HSBC set the pace with strong reports on Monday morning. Barclays (LSE: BARC) reported a 8% year on year pretax profit hike, helped by a strong performance of its investment unit. HSBC (LSE: HSBA) was also driven by the equities division, beating market expectations with a US$ 5 billion profit, half of what it gain a year ago, but a US$ 6 billion increase from H2 2008. Both banks made considerable gains, sending the rest of the sector north.

 

Lloyds Group (LSE: LLOY) and RBS (LSE: RBS), which will report on Wednesday and Friday, were up 1% and 4.9% respectively.  Standard Chartered (LSE: STAN) didn’t join the party, finishing flat following early gains.

 

Unlike the banking sector, insurance stocks fluctuated around the opening levels. Old Mutual (LSE: OML), Aviva (LSE: AV.), Standard Life (LSE: SL) and Legal & General (LSE: LGEN) all climbed less than 1%. Prudential (LSE: PRU) was slightly in the red throughout the day, not moving by much. RSA Insurance Group (LSE: RSA) added 1.7%.

 

Large Cap News

 

Soft beverage maker SABMiller plc (LSE: SAB) and Molson Coors Brewing Company (NYSE: TAP) presented impressive Q2 results for their joint venture MillerCoors today, reporting a 4th straight double digit hike in quarterly profits.

 

The JV, which is responsible for selling a number of brands owned by the two companies in the US, saw its underlying net income increase by 16.4% year on year while net sales amounted to USD 2.14 billion, up 1.6% from the previous year.

 

Consumer packaging group Rexam PLC (LSE: REX) said it is closing the Dmitrov can plant near Moscow to address the continued weakness in the Russian beverage can market. The move will reduce annual active capacity in Russia by some 1.3 billion cans but will have no impact on Rexam's ability to meet customer requirements.

 

Boosted by Lehman Brothers assets, Barclays (LSE: BARC) upped half yearly profits 8%, topping last year’s interim results but falling short of market expectations.

 

Analysts projected the profit to hit £3.5 billion, yet the numbers produced by Barclays apparently were impressive enough for investors, as the bank’s stock rose 2.5% in the morning.

 

Testing and quality control company Intertek Group (LSE: ITRK) said its half yearly results were strong, releasing good KPIs (key performance indicators) that propelled it to a 5% rise on the stock market.

 

First half revenues were £622.3 million, representing a 36.1% year on year increase from the first half of 2008, while the company’s profit before tax surged 50% to £87.7 million.
London-based bank HSBC (LSE: HSBA) followed Barclays with its own half yearly results, saying that pre-tax profits fell significantly from H1 2008, but were up from the previous half.

 

The bank reported a 57% year on year slide in net income to USD 3.35 billion, while pretax profit collapsed by 51% to USD 5.02 billion. Just like Barclays, HSBC was impacted heavily by a soaring bad debt as the bank said loan impairment costs amounted to USD 13.93 billion, a year on year increase of almost USD 4 billion.

 

Today Dawson  Holdings (LSE: DWN) confirmed that it had placed one of its four trading subsidiaries into administration - Surridge Dawson Limited.  Also immediately after, competitor Smiths News (LSE: NSW) confirmed that it had acquired part of the business from the administrators for £1.5 million.

 

Cobham PLC (LSE: COB) said   has been awarded a contract worth some £18 million by Ascent Flight Training for the first phase of the UK Military Flying Training Service (UKMFTS).

 

The contract is for the modification of four special mission Hawker-Beechcraft B350ER King Air aircraft at Cobham Aviation Services facilities at Bournemouth International Airport, and the provision of in-service support for an initial period of five years at Royal Naval Air Station Culdrose in Cornwall.

 

Small Cap News

Fox-Davies Capital issued a note on Hambledon Mining PLC (AIM: HMB), retaining its ‘buy’ recommendation for the Kazakhstan-focused emerging gold producer as well as keeping its target price at 13 pence a share.

 

Headlining the research piece “Has the corner been turned?” the broker said it anticipates the group to post a small loss for the first half of 2009 of around £1.22 million, but expects a profitable second half driven by a better operating performance.

 

Life sciences and laboratory services group Celsis International (LSE: CEL) is recommending a £54.5 million cash offer by funds advised by investment group North Atlantic Value LLP.

 

Under the terms of the offer, Celsis shareholders will receive 232.5 pence per share in cash, and the price represents a premium of approximately 14.3 percent to Celsis’s closing price of 203.5p on Friday and a premium of 39.8 percent over its average share price during the last 12 months.

 

Gulf Keystone Petroleum (AIM: GKP) said it has completed a placing of 75.6 million new common  shares at a price of 9 pence each, raising approximately £6.8 million before expenses, which, together with its cash resources, will be used to fund the ongoing exploration and drilling activities in the Kurdistan region of Iraq.

 

The funds are for the Shaikan-1 well, where the company has a 75 percent interest, which is currently drilling and for subsequent drilling of the Bijeel-1 well on the MOL operated Akri-bijeel block, in which it holds 20 percent.

 

Kalahari Minerals PLC (AIM: KAH) said 40 percent controlled Extract Resources Ltd (TSX, ASX: EXT) reported preliminary capital and operating cost estimates for the Rossing South uranium deposit at the Husab project in Namibia, showing a production rate of 15 million tonnes per annum at an estimated head grade of 487 parts per million triuranium octoxide.

 

Annual U308 production is thus estimated at 14.8 million pounds with capital costs at US$704 million and operating costs of US$23.60 per lb U3O8.

 

Shares in Landore Resources (AIM: LND) firmed in early deals this morning after the company reported further progress at its Junior Lake Property located in north-western Ontario, Canada. Junior Lake is host to multitude of mineralised targets that the company has been exploring and advancing over the past few years, including the VW Nickel Deposit, the B4-7 Nickel-Copper-Cobal-Platinum Group Elements deposit and the Lamaune Iron Ore Deposit.  Junior Lake is also prospective for precious metals, including gold.

 

Uranium and copper explorer Forte Energy NL (ASX, AIM: FTE) is starting a 6,000 metres diamond drilling programme at the Bir En Nar prospect in Mauritania this month aimed at delineating an initial JORC compliant uranium resource.

 

It is also finalising planning for a 2,000 metres reverse circulation drilling programme at Bir Moghrein in the country, examining five or six anomalies found during radiometric and electromagnetic surveys in the quarter to end-June. Drilling is expected to be completed during the December quarter.

 

Xtract Energy PLC (AIM: XTR) said its Turkish joint venture group Extrem Energy AS is shutting in the Sarikiz-2 oil well as a production well with commercial output expected to begin in October 2009, following the end of production tests on July 30.

 

The rig is now being moved to the site of the former East Sarikiz-1 well and will test the horizons from which commercial production is expected.  If successful Extrem Energy will have two commercial wells on stream in the fourth quarter.

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