Overview: the FTSE 100 trimmed losses to 0.7% after shedding more than 1% in the morning to once again slip below 5,000 points after Fitch Ratings issued a warning on the UK’s fiscal situation. The markets were supported by better than expected industrial output data from Germany, which showed better than expected 0.9% growth in April.
Temporary power provider Aggreko (LON:AGK) emerged atop the leaderboard with a 3.5% gain. Silver miner Fresnillo (LON:FRES) followed with a 3% climb, while security services group G4S (LSE: GFS) and the world’s largest miner BHP Billiton (LON:BLT) added more than 1.5%.Interdealer broker ICAP (LON:IAP) added 1.4%, while base metal miner Xstrata (LON:XTA) and gold producer Randgold Resources (LON:RRS) rose 1.1%, becoming the only other FTSE 100 constituents to add more than 1%.
Plumbing and heating equipment manufacturer Wolseley (LON:WOS) was at the bottom of the index with a 3.3% decline. Oil and gas supermajor BP (LON:BP) lost nearly 3%. Retailer Tesco (LON:TSCO) was down 2.6% after it was announced that longtime CEO Sir Terry Leahy would be relieved by Philip Clarke next year. Tour operators TUI Travel (LON:TT) and Thomas Cook (LON:TCG), chipmaker ARM Holdings (LON:ARM), London Stock Exchange Group (LON:LSE) and property companies Land Securities Group (LON:LAND) and British Land (LON:BLND) all lost just over 2%.
US stocks were off to a positive start. The Dow Jones Industrial Average and the broader S&P 500 index added 0.4%, while the technology heavy NASDAQ composite rose 0.3%.
Commodities
Crude prices are still under pressure from volatility in stock markets. Following this morning’s surge to nearly US$72.50/barrel, Brent Crude slipped to US$71.50/barrel in London after the FTSE 100 plunged below 5,000 on a statement from the Fitch Ratings agency, which said that the UK was facing a “formidable” fiscal challenge and must act very quickly to tackle the soaring budget deficit.
New Prime Minister David Cameron has pledged to implement a series of severe budget cuts, which he said would affect everybody, be “painful and tough” and even “life changing,” while warning that the country’s debt repayments could balloon to an annual £70 billion if the budget deficit is not reduced.
The news pushed down the sterling, contributing to the strength in the US dollar along with the continued weakness of the euro. Europe’s single currency is under pressure from the situation in Hungary, whose government has recently stated that the country’s budget deficit was worse than previously thought and could very well result in a crisis similar to that, which forced Greece to accept a €110 billion bailout package from the EU and the International Monetary Fund (IMF).
A stronger US dollar makes dollar-denominated commodities including crude more expensive for holders of other currencies, denting demand.
US light, sweet crude recovered after early falls, climbing to US$71.67/barrel.
All blue chip oil and gas producers were in the red today. BP (LON:BP) lost 2.5%, while fellow supermajor Shell (LON:RDSB) shed nearly 1%, as did Tullow Oil (LON:TLW), BG Group (LON:BG) and Cairn Energy (LON:CNE).
Oil and gas engineering firm Amec (LON:AMEC) was flat, while peer Petrofac (LON:PFC) was down 1.5%.
Melrose Resources (LON:MRS) led the midcaps with a 3.8% advance. Heritage Oil (LON:HOIL) also did well, adding less than 1%. JKX Oil & Gas (LON:JKX) retreated 2.1% to slid to the bottom of the pile. Dragon Oil (LSE: DGO) lost 1.7%, while Soco International (LON:SIA), Salamander Energy (LON:SMDR) and Premier Oil (LON:PMO) dropped 1.5%, 1.4% and 1.3% respectively. Dana Petroleum (LON:DNX) posted a small loss.
Wood Group (LON:WG) posted a marginal loss, while another services company Wellstream Holdings (LON:WSM) declined 2%.
Europa Oil & Gas (LON:EOG) decline 5.5%. Mongolia-focused Petro Matad Ltd (LON:MATD) and Africa and FSU operating oil and gas junior Victoria Oil & Gas (LON:VOG) both dropped 5%.
Gold pushes through $1,250
After chalking up impressive gains yesterday in US trading, gold futures continued to power higher this morning in Europe, surpassing US$1250 per ounce for the first time.
Gold has benefited in recent days from ongoing concerns about the financial stability of several smaller members of the European Union, which has pushed many investors away from buying European denominated investments to gold and other investments.
Equity markets on both side of the Atlantic have taken a pounding in recent weeks as concerns initially focused on Greece have spread to other countries in Europe, including Spain, Portugal, Italy, and as of yesterday, Hungary.
Concerns about the financial stability of the European Union have hit the Euro and Sterling hard, with both falling sharply against the US dollar.
While equities across Europe initially climbed this morning, the trend was quickly reversed. By 11am the FTSE 100 was hovering just above the 5000 level, down 64 points. The Euronext Paris and Frankfurt exchanges also fell sharply again this morning, down 1.5% and 1.3% respectively.
Moving in response to gold spot, Randgold Resources (LON:RRS, NYSE:GOLD) was one of the few climbers in the FTSE 100, rising 0.6%, while FTSE 250 gold producers African Barrick Gold (LON:ABG) also rose 0.5%.
Junior gold producers didn’t immediately react to the higher gold price however. Avocet Mining (LON:AVM), Cluff Gold (LON:CLF), Minera IRL (LON:MIRL) were little changed. Norseman Gold (LON:NGL) performed better, climbing 5%, while Oxus Gold (LON:OXS) benefited from investor reaction to its full year results. The Uzbekistan focused producer jumped 18%.
Base metals decline
Copper and nickel were in decline, sliding US$2.76/lb and US$8.06/lb, while zinc improved to US$0.73/lb.
Base metal miners were mixed. Kazakhmys (LON:KAZ) and Vedanta Resources (LON:VED) shed less than 1%. Eurasian Natural Resources (LON:ENRC) and Rio Tinto (LON:RIO) were flat, while Antofagasta (LON:ANTO) posted a small gain, Anglo American (LON:AAL) and Xstrata (LON:XTA) tacked on 1% and BHP Billiton (LON:BLT) took the lead with a 1.7% advance.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved down 1.8%.
South Africa operating chrome miner Chromex Mining (AIM: CHX) and Russia focused copper and nickel miner Amur Minerals (AIM: AMC) were in decline, shedding 9.5% and 5% respectively.
Banks, insurance, private equity
HSBC (LON:HSBA) was the best performer among the banking stocks with a gain of less than 1%. Part-nationalized banks Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) declined 1,8% and 1.2% respectively. Barclays (LON:BARC) and Standard Chartered (LON:STAN) lost 1%.
Admiral Group (LON:ADM) emerged as the top performing insurance company after managing to stay above the opening level, while the rest of the sector slipped into the red. Legal & General (LON:LGEN) and Standard Life (LON:SL) posted marginal losses, while Aviva (LON:AV), Old Mutual (LON:OML) and RSA Insurance Group (LON:RSA) lost 1% and Prudential (LON:PRU) slid 1.2%.
Private equity group 3i (LON:III) dropped 1.8%.
Small Cap Movers
Other notable movers among the small caps included IP commercialisation company Amphion Innovations (LON:AMP) with a 7.5% loss, UK based electrical components producer and supplier Cinpart (LON: CINP), which declined 7% and mobile email and data synchronisation group Synchronica PLC (LON:SYNC), which declined 6.7% after releasing its full year results today.
Large and Mid Cap News
Compass Group PLC (LSE: CPG) said it bought Southeast Service Corporation (SSC) for US$65 million in cash, or £45 million. SSC is a provider of soft support services operating in the education and business & industry sectors in the US. Revenue in the year to 31 December 2009 was US$153 million.
G4S (LON:GFS) is arguably the most acquisitive company on the FTSE 100, continually snapping up smaller organizations in markets or territories were it is keen to build its presence. This morning the international security solutions group confirmed that it had acquired Instalarme, a Brazilian electronic security solutions company predominantly working in the banking sector.
Britain’s leading supermarket group, Tesco (LON:TSCO) confirmed this morning that after 14 years at the helm of the company, Terry Leahy will retire at CEO in March 2011.
Swiss based automation and power technology giant ABB Limited (NYSE:ABB) has trumped a previous offer for London listed Chloride (LON:CHLD) from Emerson Electric (NYSE:EMR).
Small Cap News
Deltex Medical Group (AIM: DEMG) said its oesophageal Doppler monitoring (ODM) device CardioQ-ODM will become one of the first products to be reviewed by the newly established Medical Technologies Advisory Committee (MTAC) after today being selected by the National Institute for Health and Clinical Excellence (NICE).
Range Resources (ASX: RRS; AIM: RRL) has provided an update on the Russell Bevly #1 appraisal well, part of the North Chapman Ranch Joint Venture’s multi‐well program in Texas.
EMED Mining (LON:EMED) has taken another significant step towards the restart of the Proyecto Rio Tinto (PRT) in the Andalucía province of southern Spain. The company’s wholly-owned subsidiary EMED Tartessus SL has settled an outstanding issue with the Spanish Department of Social Security, relating to unpaid social security contributions incurred by the PRT’s previous owners - the now insolvent Minas de Rio Tinto (MRT).
Supermarket trolley designer and manufacturer Supercart (LON:SC.) plunged 37% this morning after the AIM listed company reported that its margins had fallen by 6.5% to 11.5% in the 12 month period ended 31 December 2009.
Uzbekistan focused gold miner Oxus Gold (LON:OXS) reported on its progress at its 50% owned Amantaytau Goldfields project in Uzbekistan - the company’s sole activity after recent divestments - during a “turning point” 2009, which also marked its return to net profit and new equity funding to finance its operations.
In its full-year results statement, Synchronica (LON:SYNC) said it believes that its Mobile Gateway sales pipeline is sufficient to meet expectations in the current financial year. For the twelve months ended 31 December 2009, the company reported a slight increase in revenue to £3.83m (FY08: £3.71m) and a significantly improved pre-tax loss of £3.22m (FY08: £6.49m loss).
Top Level Domain Holdings Ltd (LON:TLDH) told investors that it remains well-positioned to move forward with its strategic plans following a release of ICANN’s fourth version of the Draft Applicant Guidebook for generic top-level domains (gTLDs). The company highlighted that the latest draft contains only a few, and mostly small changes, which suggests that there is near-consensus and the application guidebook is near completion.
Statpro Group PLC (LON:SOG), provider of portfolio analytics and evaluation services to the global asset management industry, said it was notified that chief executive Justin Wheatley, over the last two trading days, purchased a total of 50,000 ordinary shares at 104 pence each.
In Amphion Innovations (LON:AMP) AGM statement, chief executive Richard CE Morgan told investors that the company has entered the current financial year with renewed confidence in its intellectual property (IP) licensing program, following the re-issuance of the 502 patent in the US in August of last year.
Tantalum concentrate supplier Noventa (LON:NVTA) is raising £1.38 million through a completing placing of 6.8 million new shares and the conditional placing of 14.4 million new shares at 6.5p each. The newly raised capital is expected to be used for general working capital purposes.
Western Europe operating oil and gas company Northern Petroleum (LON:NOP) managed to up its proven and probable oil reserves by 34.6% in 2009 and raised production to 1,320 bblspd (barrels of oil per day) after making a record capital investment of €29.7 million.
In its full-year results statement, Advanced Computer Software (LON:ASW) (ACS) revealed significant growth as the acquisitive healthcare-focused IT group’s impressive financials underline the progress made since it was formed 18 months ago.