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FTSE 100 weak in early trade as commodity and financial stocks open lower

Published: 21:58 21 Sep 2009 AEST

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Overview: the FTSE expectedly started lower, sitting more than 40 points below the opening level at midday, dragged down by the mining and oil & gas sector, which were weakened by lower metals and oil prices. Banking and insurance stocks also were in decline in early trade with RBS leading the way.

Royal Bank of Scotland (LSE: RBS) has been reported to be mulling a multibillion cash call to avoid the government’s asset protection scheme, causing it to make it to the bottom in the FTSE 100 with a 5.6% dip. Heating and plumbing products distributor Wolseley (LSE: WOS) declined 4.6% on no news, as did silver miner Fresnillo (LSE: FRES), which was the leading faller in the mining sector.

Turbine manufacturer Rolls-Royce Group (LSE: RR), which shed about 3%, was another non-mining stock to make it to the leading fallers list.

Satellite communications company Inmarsat (LSE: ISAT) led the blue chips with a 1.3% advance, being the only FTSE 100 constituent to add 1% or more. Retailer Marks & Spencer (LSE: MKS), specialist distribution group Bunzl (LSE: BNZL) and consumer goods company Reckitt Benckiser (LSE: RB) also managed to stay above the water, gaining 0.9%, 0.7% and 0.6% respectively.

US futures also dropped to signal a lower start on Wall Street and further weaken the blue chips.

Commodities

Oil benchmarks went south today as West Texas Intermediate slid to US$72.04/barrel, while Brent Crude fell below US$69/barrel. October US crude traded below US$72/barrel on recovery concerns and signs of weakening fuel demand. US stockpiles are up 14% compared to last year, while stockpiled of distillate fuels, which includes heating oil, are at 17 year highs.

The oil and gas sector plunged into the red in London with the exception of supergiants BP (LSE: BP) and Shell (LSE: RDSB), which were sitting just above the opening level.

BG Group (LSE: BG) continued to concede its recent gains, shedding a further 2.2% to settle at 1,114 pence per share. Fellow FTSE 100 constituents Cairn Energy (LSE: CNE) and Petrofac (LSE: PFC) followed, declining 1% each.

Tullow Oil (LSE: TLW) was the leading faller in the group, moving down 3% after last week's strong gains, fuelled by its oil discoveries in Africa.

Mid caps didn’t fare any better with Heritage Oil (LSE: HOIL) and Dana Petroleum (LSE: DNX) retreating 1% and 1.5% respectively, while Dragon Oil (LSE: DGO) moved in unison with BG, also losing 2.2%.

Some of the juniors moved against the tide, posting good gains in early trade. US focused Empyrean Energy (AIM: EME) hiked 16% after announcing a farm-out agreement with Hilcorp Energy Co for Block B of the Sugarloaf project in Texas.

Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP), which is expecting its Shaikhan-1 well in the Kurdistan of northern Iraq to enter the final target depth of 3,200 and 3,500 metres as well as a report from an independent advisory firm on the previously announced discoveries in the well, climbed a further 6% to 90.25 pence per share, coming off a strong performance on Friday when it released the updates.

EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG), which did not release any news or updates today, gained 3.5%.

Latin American focused Gold Oil (LSE: GOO) moved together with the market, shedding over 8%, as did Ukraine operating gas producer, Regal Petroleum (AIM: RPT), which moved down 4%.

Mining stocks turn negative as gold and silve rmove south

Precious metals prices slid as the US Dollar strengthened, weakening the mining sector, which switched to selling mode in early trade.

Gold was at US$1,000/oz, Silver retreated to US$16.69/oz and Platinum declined to US$1,311/oz.

Major mining stocks were all in decline in morning and early afternoon trade.

Silver miner Fresnillo (LSE: FRES) led the retreat, sliding 3.8%. Fellow blue chips platinum producer Lonmin (LSE: LMI) and Randgold Resources (LSE: RSS) weren’t far off, slumping 3.3% and 2.4% respectively.

Mid caps also took a dive. Gold miner Peter Hambro Mining (LSE: POG) slipped 3.9%, silver producer Hochschild Mining (LSE: HOC) slid 2.8% and Aquarius Platinum (LSE: AQP) dropped about 1.2%.

Specialty chemicals firm and FTSE 100 constituent Johnson Matthey (LSE: JMAT) lost 2%. Yamana Gold (LSE: YAU) declined marginally.

Juniors were mixed.

Africa focused gold deposit developer Cluff Gold (AIM: CLF) and Fijian focused gold miner Vatukoula Gold Mines (LSE: VGM) led the fallers, dipping over 6%. South Africa and Botswana operating diamond miner Firestone Diamonds (AIM: FDI) and South American focused Mariana Resources (AIM: MARL) followed with each shedding over 4%.

Latin American precious metals miner Mineral IRL (AIM: MIRL) and Western Australia operating Norseman Gold (AIM: NGL) lost about 3%.

Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) headed in a different direction, climbing 7.4% and 5.2% respectively.

Miners weak on lower copper, nickel

Base metals prices dropped early in the day, sending all key mining stocks sliding.

Anglo-Swiss miner Xstrata (LSE: XTA) was at the bottom of the pile with a 4% decline. Copper miner Kazakhmys (LSE: KAZ) followed with a 3.5% slump. BHP Billiton (LSE: BLT), Rio Tinto (LSE: RIO), which has just closed the sale of its Corumba iron ore mine in Brazil to Vale, and Vedanta Resources (LSE: VED) all slipped about 2.5%-3%.

Anglo American (LSE: AAL) fared slightly better with a decline of only 1.7%, while Chilean copper miner Antofagasta (LSE: ANTO) outperformed its sector peers, posing a marginal decrease.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) declined 1.8%.

Juniors mostly rose. Tunisia focused metal miner Maghreb Minerals (AIM: MMS) surged 8.7%.

Russian focused nickel and copper miner Amur Minerals (AIM: AMC) improved 6.5% to 10.25 pence per share. Nickel laterite play Rusina Mining (AIM: RMLA) and iron ore focused investor Red Rock Resources (AIM: RRR) each climbed over 5%.

Zinc mining and recycling specialist ZincOX (AIM: ZOX) and South American focused junior miner Herencia Resources (AIM: HER) also did well, adding about 3%.

Indonesia operating coal miner Churchill Mining (AIM: CHL), nickel and iron ore exploration junior Landore Resources (AIM: LND) and Australian focused coking coal producer Caledon Resources (AIM & ASX: CDN) moved with the majors, shedding 4.4%, 2.8% and 2.5% respectively.

Banks, insurance, private equity

Partly nationalised bank Royal Bank of Scotland (LSE: RBS) emerged as one of the leading fallers in the blue chip index on media reports of a possible cash call in the range of £3 and £5 billion in order to avoid participation in the government’s asset protection scheme. The bank dipped 5.6%, further weighing on the falling financial stocks.

Another bailed out banking group Lloyds (LSE: LLOY) shed about 3.3% in sympathy. Other FTSE 100 banks Barclays (LSE: BARC) and HSBC (LSE: HSBA) declined 1.5% and 1.2% respectively.

Standard Chartered (LSE: STAN) lost 2%.

Insurers didn’t fare much better.

Old Mutual (LSE: OML) and Prudential (LSE: PRU) were the leading fallers in the group, declining over 2%. Legal & General (LSE: LGEN) and RSA Insurance Group (LSE: RSA) fell 1.5%. Aviva (LSE: AV), Friends Provident (LSE: FP) and Standard Life (LSE: SL) all declined marginally.
Private equity group 3i (LSE: III) lost 1.3%.

Junior consumer and motor finance provider moved against the tide, adding about 2% in early trade.

Small Cap Movers

Other notable movers among the small caps included software developer smartFOCUS (AIM: STF), which rallied 7.5% and natural pesticide and parasiticide products developer TyraTech (LSE: TYR) with a 5.7% climb.  Investment company Amphion Innovations (AIM: AMP) slipped 3%.

Large and Mid Cap News

London-headquartered diversified miner Rio Tinto (LSE, ASX: RIO) said this morning it had completed the sale of its Corumba iron ore mine in western Brazil to the world’s biggest iron ore miner Vale S.A (NYSE: RIO).

UK Commercial real estate firm Land Securities (LSE: LAND) announced the sale of its stake in Britain’s premier retail complex, the Bullring, Birmingham. British Land owned one third of the Bullring shopping centre. Investors have been relatively unmoved by the news, Land Securities shares are fairly unchanged so far on Monday morning.

Small Cap News

Mobile email and data synchronisation specialist Synchronica PLC (AIM: SYNC) said it won a purchase order from a mobile operator in the Middle East for an initial 100,000 user license of its mobile email product Mobile Gateway plus a contract for professional services. The initial value of the deal is US$162,000.

US operating oil and gas company Range Resources (ASX: RRS, AIM: RRL) added another project to its international portfolio with the acquisition of a 25% working interest in the North Chapman Ranch project in Texas from US based Crest Resources announced this morning.

Empyrean Energy PLC (AIM: EME) said Texas Crude Energy Inc (TCEI) has successfully farmed out Block B in the Sugarloaf project, part of the Sugarkane gas and condensate field in Texas, US.

Siberian focused oil and gas company PetroNeft Resources (AIM: PTR) said it had placed over 120 million new shares at £0.14 per share to raise US$27.5 million to fund the development programme at its License 61 project in Russia as well as cover corporate overheads.

Chinese coal bed methane business Green Dragon Gas Ltd (AIM: GDG) said the business continues to grow at a steady pace as it reported results for the first half, showing revenue increasing to US$18.7 million from US$2.4 million, with the growth coming predominately from its downstream operations.

Advanced Computer Software PLC (AIM: ASW) said results for the six months to August 31 2009 have been in line with management expectations, with its software business Adastra continuing to show strong year on year growth in revenues and profitability, as order intake rose and costs remained under tight control.

Earlier this month, Canadian based junior gold developer Rambler Metals and Mining Plc (AIM: RMM & TSX- V: RAB) announced the purchase of the Nugget Pond processing facility on the Baie Verte peninsula. Today Rambler released an update identifying a further expansion of its operations in Newfoundland, Canada.

Shares in Lighthouse Group (AIM: LGT) were in demand this morning after the financial advice and wealth management firm released its interim results, saying it had traded “at least in line with expectations” since June due to improvements in share prices and the impact of sustained low interest rates.

Westminster Group PLC (AIM: WSG) said it has been appointed by Ensco Inc as preferred UK distributor and supplier of their MicroSearch advanced heartbeat detector, which can detect humans hiding in vehicles or containers. Existing UK customers include HM Prison Service, Scottish Prison Service, and the UK Border Agency.

Technology commercialization and investment business Imperial Innovations Group (AIM: IVO) said today it had made an investment of £1.16 million in cellular therapeutics company Cell Medica to help it develop and commercialise Virus-specific Immune Reconstitution cell therapy technique, aimed at protecting patients with weakened immune systems from cytomegalovirus infections, which are a major cause of mortality in this patient group.

Indian based Animator DQ Entertainment (AIM: DQE) has announced the commissioning of a second series of the ‘Penguins of Madagascar’ series for Nickelodeon animation studios. DQE were awarded the contract to produce the CGI animated series following the quality and delivery of the first series. Investors are expected to react positively to the news which further underpins DQ’s standing among its industry partners.

Xtract Energy PLC (AIM: XTR) said its Turkish joint venture group Extrem Energy AS, in which it holds 34 percent, has re-entered the Alasehir-1 well on the Alasehir licence area and is currently preparing it for perforation and flow testing.

Israel-headquartered Amiad Filtration Systems Ltd (AIM: AFX) said it expects full year results to be in line with market expectations as it reported a slight rise in pretax for the first half to June 30 2009.

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