Overview: the FTSE 100 lost a further 1% after declining 1.5% yesterday after Q1 US GDP growth was revised downwards to an annualized rate of 2.7% from an initial estimate of 3.2% and an updated 3%. The biggest news of the day came from the US, where congressional lawmakers approved a massive financial reform, which will now go to the House of Representatives. The new legislation will set up a new Consumer Protection Agency, responsible for regulatory oversight of credit card companies and mortgage lenders and also extend the government’s regulatory powers over the banking sector.
Still, the markets were in decline despite a bullish update on the University of Michigan’s consumer confidence index, which reached its highest level in 2.5 years at 76 this month, compared to 73.6 in May.
In other news, Bank of England warned that UK banks were exposed to the ongoing European debt crisis and limited lending in the euro zone.
Consumer goods company Reckitt Benckiser (LON:RB) led the blue chips, advancing 2.3%. Bank Standard Chartered (LON:STAN) was the only other FTSE 100 constituent to add more than 1%, tacking on 1.1%. Commercial property company Segro (LON:SGRO), water company Severn Trent (LON:SVT) and outsourcing company Capita Group (LON:CPI) added nearly 1%.
Oil and gas supermajor BP (LON:BP) was at the bottom of the pile with a 7% loss. Kazakhstan focused base metal miners Eurasian Natural Resources (LON:ENRC) and Kazakhmys (LON:KAZ) followed with losses of 5% and 4.4% respectively, while sector peers Antofagasta (LON:ANTO) and Xstrata (LON:XTA) declined 4%.
US stocks were off to a negative start. The Dow Jones Industrial Average declined 0.5%, the broader S&P 500 index slid 0.35% and the technology heavy NASDAQ composite retreated 0.3%.
The current negative trends in the market continued today, though oil prices were slightly higher despite this week’s bearish inventories reports and weak economic data, indicating a slow pace of economic recovery in the US.
Stock markets in Europe and the US suffered another round of losses yesterday after the Federal Reserve commented that current financial conditions had become “less supportive” of the economic growth due to “developments abroad,” apparently referring to the debt crisis that is currently ravaging Europe.
August Brent Crude rose to US$76.23/barrel, while US light, sweet crude for August delivery stood at US$76.48/barrel.
Blue chip oil and gas producers were in decline today. BP (LON:BP) tumbled 5% to hit a fresh 14 year low. Fellow supermajor Shell (LON:RDSB) slid 1.3%. Tullow Oil (LON:TLW) and BG Group (LON:BG) declined 1.75% and 1.6% respectively. Cairn Energy (LON:CNE) shed less than 1%.
Services companies Amec (LON:AMEC) and Petrofac (LON:PFC) were unmoved.
Melrose Resources (LON:MRS) led the midcaps with a 4.3% gain. Dragon Oil (LON:DGO) and Premier Oil (LON:PMO) advanced 1.2% and 1%, while Dana Petroleum (LON:DNX) and Heritage Oil (LON:HOIL) posted small gains. JKX Oil & gas (LON:JKX) was at the bottom of the pile with a 4% loss. Soco International (LON:SIA) shed less than 1% while Salamander Energy (LON:SMDR) was flat.
Wellstream Holdings (LON:WSM) was unmoved, while another services company Wood Group (LON:WG) advanced 1.1%.
Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) led the juniors, rallying 10%. Irish oil and gas exploration company Petroceltic International (AIM: PCI) and Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) slipped into the red with losses of nearly 9%.
Gold rallies on safe haven demand
Gold rallied today, reaching US$1,255/oz as investors were once again pouring money into safe haven assets following a decline on profit taking earlier in the week, which came after the yellow metal posted new record highs of US$1,266/oz.
Safe haven buying returned following another batch of mixed data, which came out of the US yesterday. It was reported that existing home sales declined 2.2% in May, while new home sales plummeted 32.7% during the month after the federal tax credit for home buyers ended on May 1.
Other precious metals followed as silver and platinum advanced to US$18.89/oz and US$1,562/oz respectively.
Major mining stocks were mixed. Randgold Resources (LON:RRS) led the sector in the FTSE 100, while platinum miner Lonmin (LON:LMI) and silver producer Frensillo (LON:FRES) declined 2.6% and 1.1% respectively.
Specialty chemicals firm Johnson Matthey (LON:JMAT) lost nearly 1%.
In the FTSE 250, gold miner Petropavlovsk (LON:POG) and Aquarius Platinum (LON:AQP) each lost 1.4%, while silver miner Hochschild Mining (LON:HOC) gained 2%.
Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) was one of the top performers in the sector with a 6% climb.
Copper and gold miner EMED Mining (AIM: EMED) headed in the opposite direction, slipping 9.5%.
Copper and nickel fall to weaken miners
Base metals were mixed today. While copper and zinc declined to US$3/lb and US$0.82/lb respectively, while nickel rose to US$8.86/lb.
Most base metal focused stocks were in decline. Eurasian Natural Resources (LON:ENRC), Kazakhmys (LON:KAZ) and Antofagasta (LON:ANTO) slipped 4.5%, 4% and 3.5% respectively. Rio Tinto (LON:RIO) and Xstrata (LON:XTA) added slightly more than 3%. Anglo American (LON:AAL) and Vedanta Resources (LON:VED) added nearly 3%, while BHP Billiton (LON:BLT) climbed 2.5%.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) shed less than 1%.
Most juniors didn’t show much movement. South Africa based coal exploration and production company Strategic Natural Resources (AIM: SNR) slipped 13% on no news.
Banks, insurance, private equity
Bankins stocks were mixed. Part-nationalised Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) slipped 2.7% and 1% respectively, while Barclays (LON:BARC) lost 1.7%. Standard Chartered (LON:STAN) and HSBC (LON:HSBA) advanced 1.6% and 1%.
Prudential (LON:PRU) and Aviva (LON:AV) shed nearly 2%. Standard Life (LON:SL) dropped 1.1%, while Old Mutual (LON:OML) lost 1% and Legal & General (LON:LGEN) shed less than 1%. Admiral Group (LON:ADM) was flat and RSA Insurance Group (LON:RSA) was sitting just above the opening level.
Private equity group 3i (LON:III) posted a marginal loss.
Small Cap Movers
Other notable movers among the small caps included UK based electrical components producer and supplier Cinpart (AIM: CINP) with a 10% rally and developer of CAD and image analysis software Medicsight (AIM: MDST), which slipped 11%.
Small Cap News
Finders Resources (ASX:FND, LON:FND) expects to complete its current reverse circulation drilling program at the Ojolali gold-silver project in Sumatra by Friday 25th June and aims to increase open-pittable oxide resources to a level sufficient to support a viable start–up mining operation.
Xtract Energy (LON:XTR) highlighted a resource update, released yesterday by its 50%-owned associate Elko Energy, for the Denmark exploration license 02/05 and the Netherlands licenses P01 and P02. Elko hired TRACS International to update the Independent Competent Persons Report (CPR) for both projects.
Tower Resources (LON:TRP) has granted a continuing option over the Uganda license EA5 to partner Global Petroleum (LON:GBP, ASX:GBP), giving it the right to convert the investment it has made so far into a 25% legal and beneficial interest in the project without any obligation to contribute to ongoing expenditure.
Irish oil and gas explorer and producer Providence Resources (LON:PVR) has confirmed its 2010 drilling programme at the Singleton field onshore UK, which is currently producing 800 boepd (barrels of oil equivalent per day) from seven production wells.
In its preliminary results, Petrel Resources (LON:PET) said it is better placed today than it has been for some years and will see a continued focus on Iraq with growing activities in Africa. After resolving all the outstanding issues, in relation to the Subba and Luhais oilfield, with its Iraqi partner Makham, development work recommenced in May.
Exillon Energy (LON:EXI) has undertaken a share placement to raise £21.3 million to fund additional development activities, including infrastructure improvements that could slash operating costs by 60%.
In light of its positive long-term global macroeconomic outlook for the global metals, mining and resources sector, a new resource-focused group, Vallar Plc is set to join the London Stock Exchange with a proposed £600m IPO.
Australian based miner Allied Gold (LON: AGLD, TSX: ALG, ASX: ALLD) will stay hedge free after completing project funding for the Gold Ridge project in the Solomon Islands, with a US$35 million loan from the International Finance Corporation (IFC), a member of the World Bank Group.
Aurelian Oil & Gas (LON:AUL) reported well-test results from Climauti-1, in the Suceava Block, Romania, which tested at a rate of 2.7m scf/d (standard cubic feet per day) at a flowing tubing head pressure of 30bar. The Suceava Block is being explored through a 50:50% joint venture with Regal Petroleum (LON:RPT).
In its final results statement, DiamondCorp (LON:DCP, JSE:DMC) said it has emerged from the global financial collapse in better shape than it would have expected only a year ago, when the company started underground mine development at the Lace mine in South Africa, following the cessation of surface mining activities.
JSC Polymetal (LON:PMTL, MICEX, RTS: PMTL) looks set to acquire the mining license for the Svetloye gold deposit in the Russian Far East with a US$9.25m cash deal with Fortress Minerals Corp (TSX-V:FST). The JSC proposal was accepted by Fortress as a superior proposal to a pre-existing arrangement with MacRitchie Metals Pte Ltd.
The management of Seeing Machines (LON:SEE) is confident that delayed orders will come through in the coming weeks, and the revenues will be recognised in H1 FY11, Edison Investment Research said in a research note. Edison added that there has been no weakening in the sales pipeline, the group remains well capitalised and the significant scope of opportunity for business is undiminished.
A new world-class zinc mine may soon be identified in southwest Ireland, according to independent merchant bank Beaufort International. In a research note on Connemara Mining (LON:CON), Beaufort highlighted that Connemara controls one of two adjacent licence blocks, from which Beaufort said exceptional recent drilling results and much anticipated resource estimates are likely to have just scratched the surface of prospects which are still over 60% unexplored.
European focused oil and gas exploration and development company Northern Petroleum (LON:NOP) announced a three pronged plan of action this morning designed to speed up the pace of development of its substantial positions in Italy and the Netherlands.
It was a double whammy for shareholders in Cinpart (LON:CINP) this morning after the company released final results and announced a Memorandum of Understanding (MOU) with a large non-partisan organization in the United States, which could lead to a major push of its voltage optimization product into schools, prisons and other local authority buildings.
In its interim results, Stellar Diamonds (LON:STEL) was upbeat on its progress after a transformational six-months in which it joined the AIM market through the reverse takeover of West African Diamonds. “With an improving diamond sector I feel that the future outlook for Stellar is good as we ramp up production and position the company to become one of the largest diamond producers in West Africa and on AIM”, Stellar Chairman Lord Daresbury stated.