Overview: the FTSE 100 trimmed losses to just 0.5% in late afternoon after shedding more than 2% earlier in the day on jitters over the situation in the European banking system and concerns over the Chinese demand following a report of declines in the rate of the growth of manufacturing activity in the country. Oil and gas supermajor BP (LSE: BP) heavily contributed to the selloff, tumbling 15% after the top kill operaiton failed to stop the oil leak in the Gulf of Mexico.
Insurer Prudential (LSE: PRU) was the top performing blue chip today with a 7% surge after AIG (NYSE: AIG) rejected its attempt to renegotiate the sale price of AIG’s Asian assets. Gold producer Randgold Resources (LSE: RRS) and another insurance company Legal & General (LSE: LGEN) followed, climbing 2.8% and 2.3% respectively. Other notable risers included water company Severn Trent (LSE: SVT), which added 2.2%, credit information group Experian (LSE: EXPN) and chipmaker ARM Holdings (LSE: ARM), which both tacked on slightly more than 1.5%, and Imperial Tobacco Group (LSE: IMT) with a 1.3% gain.
BP (LSE: BP) tumbled 15% to slide to the bottom. Tour operator TUI Travel (LSE: TT) and miners Kazakhmys (LSE: KAZ) and BHP Billiton (LSE: BLT) followed with losses of over 3%.
US stocks started the day in the red, but later recovered. The Dow Jones Industrial Average climbed 0.4%, while the broader S&P 500 index added 0.15% and the technology heavy NASDAQ composite climbed 0.55%.
Oil prices fell today after stock markets in Europe plunged, while futures for the main stock market indexes in the US declined to signal a lower open on Wall Street today. The FTSE 100 plummeted 2% after oil and gas supermajor BP (LSE: BP) conceded that its top kill operation in the Gulf of Mexico failed to plug the oil leak and the crisis could extend well into August with the completion of a relief well. BP is estimating its own losses resulting from the largest oil spill in US history at close to US$1 billion.
Meanwhile, the euro has hit fresh four year lows after the European Central Bank (ECB) said that euro zone banks could get hit by as much as €195 billion in bad loan write downs this year and more in the following year. This added to the fears over the strength of Europe’s banking system after a small savings bank was bailed out by the Bank of Spain just over a week ago, causing yet more panic in the markets that heavily contributed to the massive selloff that saw the FTSE 100 and the Dow Jones Industrial Average plunge below 5,000 and 10,000 respectively.
The US dollar hit a 15 month high against a basket of other major currencies as the euro fell, while the sterling also declined on the bad news from BP. A stronger American currency makes dollar-denominated commodities such as crude more expensive for holders of other currencies, denting demand.
More bearish news came from China, whose manufacturing growth slowed from 55.2 to 52.7, according to the HSBC China Manufacturing PMI (Purchasing Managers Index).
July Brent Crude slipped to US$72.27/barrel, while US light, sweet crude for July delivery slid to US$71.78/barrel.
Blue chip oil and gas producers were in decline today. BP (LSE: BP), which is still struggling to contain the massive oil spill in the Gulf of Mexico, tumbled 15%. Fellow supermajor Shell (LSE: RDSB) lost 1.5%, as did Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW). BG Group (LSE: BG) shed less than 1%.
Petrofac (LSE: PFC) was flat, while fellow oil and gas engineering firm Amec (LSE: AMEC) slid 1.1%.
Midcaps were in decline. JKX Oil & Gas (LSE: JKX) and Salamander Energy (LSE: SMDR) were at the bottom of the pile with losses of 4.5%. Premier Oil (LSE: PMO) was down 3.2%, while Dana Petroleum (LSE: DNX), Dragon Oil (LSE: DGO) and Melrose Resources (LSE: MRS) retreated 2.5%. Heritage Oil (LSE: HOIL) dropped 2% and Soco international (LSE: SIA) shed 1.5%.
Service companies followed with Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) slipping 4%.
Juniors were mixed. Europe focused oil and gas developer Ascent Resources (AIM: AST) declined 10%, Mongolia-focused Petro Matad Ltd (AIM: MATD), which was forced to halt operations at its Davsan Tolgoi project in Mongolia because of an outbreak of the foot and mouth disease, followed with a 6% loss, while Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) and North America focused oil & gas junior Pantheon Resources (AIM: PANR) slid 4.5%.
US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) led the sector with a 38% rally. Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) also did well, adding 5%.
Gold steady at $1,220, silver and platinum slide
The renewed jitters over the European debt crisis fuelled gold prices, providing the yellow metal with enough support to hold on to US$1,220/oz. Other precious metals declined with silver and platinum sliding to US$18.36/oz and US$1,544/oz respectively.
Gold miners did well today, while other mining stocks declined. Randgold Resources and fellow gold miner from the FTSE 250 Petropavlovsk (LSE: POG) added less than 1%, as did specialty chemicals firm Johnson Matthey (LSE: JMAT).
Silver miner Fresnillo (LSE: FRES) declined 1.2%, while peer midcap Hochschild Mining (LSE: HOC) lost 2.6%. Platinum miners Lonmin (LSE: LMI) and Aquarius Platinum (LSE: AQP) both slid 2.7%.
Most small cap mining companies were in the red. Fiji focused gold miner Vatukoula Gold Mines (AIM: VGM) dropped 8%, while Iran focused gold explorer Persian Gold (AIM: PNG) and commodity asset development company Mercator Gold (AIM: MCR) followed, dropping 6.5% and 5% respectively.
Orosur Mining (LSE: OMI) led the way with a 16% surge.
Copper and nickel fall to topple miners
Base metals were weakened by today’s news from China. Copper and nickel slid to US$3.04/lb and US$9.25/lb, while zinc retreated to US$0.82/lb.
Base metal focused miners were in decline. BHP Billiton (LSE: BLT) and Kazakhmys (LSE: KAZ) lost 3.5%, while Anglo American (LSE: AAL), Rio Tinto (LSE: RIO) and Xstrata (LSE: XTA) were down 2.5% and Eurasian Natural Resources (LSE: ENRC) shed slightly more than 2%, as did Vedanta Resources (LSE: VED). Antofagasta (LSE: ANTO) retreated 2%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, slipping 4%.
Most junior companies followed the trend.
Cement operator Prosperity Mineral Holdings (AIM: PMHL) dropped 18%. Zinc miner Connemara Mining (AIM: CON) and South Africa operating chrome miner Chromex Mining (AIM: CHX) followed, sliding 7% and 6% respectively. Mineral sands producer Kenmare Resources (LSE: KMR) also lost 6%, while London Mining (AIM: LOND) and South American focused junior miner Herencia Resources (AIM: HER) declined 5.5% and 5% respectively.
Banks, insurance, private equity
All major banking stocks turned negative today. Royal Bank of Scotland (LSE: RBS) moved down 2%, while fellow part-nationalised bank Lloyds (LSE: LLOY) posted a small loss, as did Standard Chartered (LSE: STAN) and HSBC (LSE: HSBA). Barclays (LSE: BARC) slid to the bottom of the pile with a 2.3% decline.
Most insurance companies climbed with the exception of Old Mutual (LSE: OML), which shed 2.5%, and RSA Insurance Group (LSE: RSA), which was flat. Prudential (LSE: PRU) led the way with a 6.5% rally after AIG (NYSE: AIG) rejected its request to negotiate a reduction of the price of its Asian assets. Legal & General (LSE: LGEN) and Aviva (LSE: AV) were up 2.5% and 2% respectively, while Admiral Group (LSE: ADM) rose 1.5% and Standard Life (LSE: SL) posted a marginal gain.
Private equity group 3i (LSE: III) added less than 1%.
Small Cap Movers
Other notable movers among the small caps included environmental science and technology company Accsys Technologies (AIM: AXS), which lost 6.7% and stem cell therapy company ReNeuron (AIM: RENE), which added 6%.
Large and Mid Cap News
FTSE 100 constituent The Capital Group (LON:CPI) has snapped up medical reporting and screening services company Premier Medical Group for £60 million in cash.
FTSE 100 constituent Whitbread (LON: WTB) was forced to deny rumours in the weekend press that it was about to announce a placing to raise capital.
Small Cap News
Prosperity Minerals Holdings (LON:PMHL) has announced the next-step in its development as it continues to diversify its business model after it sold most of its Chinese cement businesses earlier this year for over £385 million. The company is now set to add real estate operations to its new business structure, with the signing of conditional agreements to acquire property interests in the People’s Republic of China (PRC).
Petroceltic (LSE:PCI) has inked a farm-out agreement with junior oil and gas company Orca Exploration (TSX-V:ORC) to help finance the costs of drilling a well into the Elsa Field in the Adriatic Sea, offshore Italy.
Clarity Commerce Solutions (LON:CCS) has re-acquired Middlesex-based IT help-desk specialists Cyntergy Services Ltd in a deal worth up to £150,000. According to Clarity, the addition of the previously-owned business unit is expected to significantly enhance Clarity’s prospects in future customer bid processes, and support its growing support the company’s recent new contract wins.
Rambler Metals and Mining’s (TSX-V: RAB, AIM: RMM) Ming Copper Gold Mine has received final environmental approval and project release, from the Government of Newfoundland and Labrador. The approval allows Rambler to start project development, and allow production to begin in 2011.
Gold explorer and developer Chaarat Gold (LON:CGH) has secured a renewal of the exploration license agreement over its 4 Moz (million ounce) Chaarat gold project in Kyrgyzstan until 31 December 2012.
Mongolia-focused Petro Matad (LON: MATD) said that an outbreak of foot and mouth disease has forced it to temporarily suspend operations at its Davsan Tolgoi project in Block XX in Mongolia.
Imperial Innovations Group (LON:IVO) has sold its portfolio company Respivert to Centocor Ortho Biotech for £9.5 million, thus achieving a 4.7x return on Innovations’ three-year investment (ROI).
Sabien Technology (LON:SNT) lost a fifth of its market capitalisation this morning after the manufacturer and supplier energy efficiency technology warned that several key contracts had been delayed in the next financial year.
African Aura Mining (LON:AAAM, TSX:AAAM) released its financial results for the quarter today, reporting an income of US$0.5 million compared to a loss in 2009, and reaffirmed its operational targets for 2010, which will include a drilling programme at the Knout iron ore project in Cameroon and a resource definition drilling programme at the New Liberty gold deposit in Liberia.
Altona Energy (LON: ANR) confirmed that it’s proposed joint venture partner, China National Offshore Oil Corporation (NYSE:CEO) has been formally approved by the Australian authorities. The Foreign Investment Review Board confirmed that there was no objection under Australia's Foreign Investment Policy. Consequently, the Chinese partner can now provide funding and the JV can proceed with the advancement of the massive Arckaringa coal and power project.
Xtract Energy’s (AIM: XTR) 50%-owned associate, Elko Energy has finalised a farm-out deal with Norwegian Energy Company ASA in relation to the 02/05 licence offshore Denmark. Elko will receive approximately US$1m in cash from the deal.