The provisional UK GDP data for Q2 turned out to be worse than expected, marking a 0.8% slip instead of the forecasted 0.3% and dashing any hopes for a quick recovery. Industrial production fell, as did services and construction output, making a negative impact on the GDP. The GDP for full year 2009 is now projected to post a 4.5% decline.
Even with the economic rebound obviously put off, investors remained optimistic and appeared unwilling to retreat after posting the longest winning streak in more than 5 years. Footsie started the day with an expected correction after a week of solid gains, slipping by some 20 points, but quickly bounced back and went up 30 points above the opening level. The gains were trimmed to just below 20 points by the end of the day, but the market still managed to stay on positive ground to extend the winning streak to 10 sessions.
Mining and banking sectors were strong for a second day running, continuing their rebound after setbacks suffered earlier in the week.
Expectations were once again high for US futures this morning after Dow Jones Industrial Average improved by 2.1% to close up 188 points at 9069 yesterday. However, US futures opened mixed, dragged down by Microsoft and Amazon as both reported weaker than expected sales and revenue results.
National Express (LSE: NEX) was among the top risers with an improvement of 7.6% after a consortium made up of CVC Capital Partners and the Cosmen family put together an indicative acquisition proposal for NEX, which has been putting up good results in July after having little to cheer about for over 6 months.
The tone was set by mobile network operator Vodafone (LSE: VOD), which reported a 9.3% increase in revenue for the quarter ending in June. Vodafone Group gained 2.2%. Mobile Telecommunications were among the top performing sectors today, going up by 60 points.
Utilities continued tumbling on the heels of yesterday’s proposals from regulator Ofwat, aimed at cutting the average water bill by as much as £14 between 2010 and 2015. Yesterday’s leading fallers Severn Trent (LSE: SVT) and Pennon Group (LSE: PNN) were on decline throughout the day, losing 1.2% and 4.1% respectively. Pennon ended up as the biggest faller in FTSE 100. United Utilities (LSE: UU.) lost more than 5% on Thursday, but held steady today after reporting current trading was in line with the company’s expectations.
Commodities
After testing USD 960/ounce yesterday, gold added about USD 4.50 and climbed to USD 952/ounce today, about the same price level as in the early deals this morning. Silver remained unmoved at USD 13.7/ounce, while platinum added USD 8.00 improving to USD 1183/ounce.
Copper rose marginally to USD 2.50/pound, zinc was slightly below USD 0.76/pound, while nickel went up to USD 7.45/pound. Brent Crude was slightly below USD 69/barrel.
After a slow start to the day, miners continued rising, with Lonmin (LSE: LMI) surging by 4.2% to become the top riser of the day. Its share prices improved to 1248p.
Aquarius Platinum (LSE: AQP) continued rallying, going up to 239p, a 3.3% improvement from Thursday. Johnson Matthey (LSE: JMAT) also climbed, going up by 2.3% to reach 1309p.
Gold and silver producers were on decline for most of the day. Randgold Resources (LSE: RRS) slipped 1.3%, Peter Hambro Mining (LSE: POG) suffered insignificant losses and Yamana Gold (LSE: YAU) stayed flat.
Junior Gold companies mostly opened flat and did not make much movement during the day with the exception of Oxus Gold (AIM: OXS), which upped by 5.8%. Kryso Resources (AIM: KYS) and Pan African Resources (AIM: PAF) were flat, while Patagonia Gold (AIM: PGD) lost 1.6%. Medusa Mining (AIM & ASX: MML) added 1.5%. Cluff Gold (AIM & TSX: CLF) fell 1.3%.
After making significant gains yesterday, silver producer Fresnillo (LSE: FRES) underwent a slight correction slipping by 1.7%. Hochschild Mining (LSE: HOC) made a modest gain of 1.2% in the morning, but tracked back and finished -0.2%.
One of the leading newsmakers of this week BHP Billiton (LSE: BLT) moved up slightly, while coal and base metals miner Xstrata (LSE: XTA) retreated by less than 1%. Anglo American (LSE: AAL) declined by 1.4% after De Beers, in which Anglo holds a 45% stake, reported declines in sales and profits. Rio Tinto (LSE: RIO) gained 1.5%.
Copper miners were once again on the rise this morning, but then headed in different directions. Vedanta (LSE: VED) lost 2%, Kazakhmys (LSE: KAZ) ended up flat and Antofagasta (LSE: ANTO) gained 2.4%. First Quantum Minerals (LSE & TSX: FQM) produced a gain of 1.9%.
Thursday’s leader Eurasian Natural Resources (LSE: ENRC) underwent correction and recorded a 2.7% loss.
BP (LSE: BP.) saw its stock surge 1.2% this morning after news of positive development in Iraq, where a BP-led group is trying to work out a deal to develop Iraq’s largest oilfield. Yet the company then retreated and finished flat. Shell (LSE: RDSB) also added 1.2%.
Cairn Energy (LSE: CNE) went in a different direction and lost 1%. Dragon Oil (LSE: DGO) was up 1%. Dana Petroleum (LSE: DNX) was unmoved.
Insurance, banks, private equity rise
Banks and financial shares rose for the second straight day after tumbling earlier in the week. The European Commission outlined its approach towards banks that have received state support, saying they should shoulder some of the restructuring costs and must become viable without being supported by government funds within 5 years. The remarks were in part directed at Lloyds Group and the Royal Bank of Scotland, as both have received state support in the aftermath of the financial crisis.
Lloyds and RBS both posted gains, as did other major banks. Insurance stocks also improved this morning, but were on decline later in the day producing mixed results.
Lloyds Group (LSE: LLOY) was up 2.6%, while RBS (LSE: RBS) gained 2.5% and HSBC (LSE: HSBA) added 1.0%. Barclays (LSE: BARC) posted a gain of 3.2%, while Standard Chartered (LSE: STAN) climbed 3.3%.
Insurance groups. Legal & General (LSE: LGEN) rose 2.1%, while Prudential (LSE: PRU) suffered insignificant losses despite a good start to the day. Aviva (LSE: AV.) did not show much movement and Old Mutual (LSE: OML) was down 1%.
Private equity group 3i (LSE: III) was among the leaders in FTSE 100 gaining 3.2%.
Large Cap News
Vodafone Group (LSE: VOD) said it is trading in line with the management's outlook issued in May 2009 for the current financial year as it reported a 9.3 percent rise in group revenue for the first quarter to £10.7 billion. It confirmed the guidance for the current financial year.
United Utilities Group (LSE: UU) said current trading is in line with the group's expectations of delivering a sound underlying financial performance in 2009/10 and expects to grow dividends for the year by 5 percent.
Defence and support services company VT Group (LSE: VTG) has announced it reached an agreement to extend existing support contracts with the UK Government.
The extended deals include an engineering and framework contract with a government agency, which will run for 5 more years until 2015 after an option was exercised. Training and soft facilities management deals of VT’s Flagship training business with the Royal Navy were prolonged from June 2011 to December 2011 and April 2013 respectively.
A consortium including funds advised by CVC Capital Partners and interests of the Cosmen family confirmed this morning that they had made an indicative proposal to acquire bus, rail and coach operator National Express Group (LSE: NEX) for cash.
The price of the offer was not disclosed, and CVC Capital Partners were keen to stress that there could be no certainty that any offer would be made.
De Beers SA, in which Anglo American PLC (LSE: AAL) is the majority shareholder with 45 percent, reported a drop in sales and profits for the first half, but stressed it remained profitable during the period in spite of extremely difficult trading conditions, particularly in the first quarter, and that it has seen an upturn in the second quarter.
Pretax profit before finance charges fell to US$140 million in the six months to June 30 2009 from US$662 million a year earlier and EBITDA was down at US$297 million compared to US$831 million.
Small Cap News
Co-operative Financial Services Ltd and Britannia Building Society issued a joint statement welcoming today's decision by the Financial Services Authority (FSA) to formally approve the merger of Co-operative Bank PLC (LSE: CPBB) and Britannia with effect from August 1 2009.
The merger will create a large, financially strong and well diversified mutual business operating in both retail and corporate markets.
Findel PLC (LSE: FDL) announced plans to raise 81 million before expenses in a fully underwritten placing and open offer of 404,312,124 million new shares at 20 pence each, allowing the group to accelerate its debt reduction plan and enter into cheaper and less restrictive bank facilities. It said the future strategy will focus on the core Home Shopping and Education Supplies divisions.
In a separate statement, Findel reported results for the full-year ending April 3, with sales from continuing operations dipping to £599.8 million from £610.6 million a year earlier, and the group swinging to a pretax loss of £51.9 million from a profit a year earlier of £25.2 million.
Telit Communications PLC (AIM: TCM) said its current manufacturing agreement with SEM, the Milan-based manufacturing arm of global electronics service provider BAMES, has been converted to be non-exclusive, and it is shifting the bulk of the manufacturing to China.
Telit has begun parallel manufacturing with a new, unspecified manufacturer in China and expects that a majority of its products will be manufactured in China starting from 2010.
Avocet Mining (LSE: AVM) was little changed in early trading after releasing a first quarter update for the three month period ended June 30, 2009. The junior gold producer reported first quarter gold production of 27,563 ounces, up 1% on the previous quarter. Total cash costs before adjustment for deferred stripping fell 2% compared to the previous quarter to US$597/ounce.
Exploration and production company Victoria Oil & Gas (AIM: VOG) said today it has wrapped up the second tranche of equity placing it announced in June. Victoria has placed 76,625,000 new ordinary shares through Fox-Davies Capital Limited to add £2.3 million before expenses to the initial placing of £3 million, which was announced on the same day as the second tranche.
Mongolia-focused oil explorer Petro Matad (AIM: MATD) has narrowed losses and increased revenues in the first half to end-June 2009, and envisages commencing a three well drill programme in the 2009 drill season.
In its interim results statement, the company said the immediate priority is the drilling of exploration wells in Block XX, specifically on the Davsan Tolgoi prospect. As soon as satisfactory funding has been assessed and finalised, the drilling programme will commence.
TXO PLC (AIM: TXO) said TOGS Energy Inc, its wholly owned Texas oil and gas company with interests in 348 wells, has entered into a joint venture agreement with Endeavor Power Corp (OTCBB:EDVP).
This joint venture calls for the continued reworking, further development and completion of six wells in the Randle Fair Christian Lease located in Gregg County, Texas. All lease operations will be conducted by M-C Production & Drilling Co Inc.