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FTSE 100 adds 1.2%, Dow Jones, S&P 500 and NASDAQ seen higher on US jobs data

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Overview: markets in both the US and Europe bounced back today after US employment data came in better than expected, sowing a decline in unemployment rate to 9.5%, compared to an expected increase from 9.7% to 9.8%, despite a decrease of 125,000 in non-farm payrolls.

Earlier this week, Automatic Data Processing has said that private sector created just 13,000 new jobs last month.

Banking group Barclays (LON:BARC) and base metal miner Xstrata (LON:XTA) emerged atop the leaderboard with gains of 5%. Oil and gas producer Cairn Energy (LON:CNE) and part-nationalised bank Lloyds (LON:LLOY) followed, climbing 4.7%.

Medical devices manufacturer Smith & Nephew (LON:SN) was at the bottom of the pile with a 3% loss. Business services company Serco Group (LON:SRP) and consumer goods company Reckitt Benckiser (LON:RB) tacked on just over 1.5%. Telecom companies Cable & Wireless Worldwide (LON:CW), BT Group (LON:BT.A) and Vodafone (LON:VOD) added slightly more than 1%.

Futures for the Dow Jones Industrial Average rose 0.2% this morning. Futures for the S&P 500 and NASDAQ indexes are also pointing to a higher start on Wall Street.

Commodities

Oil prices remained at about the same level in the morning and early afternoon as traders took a pause in anticipation of key US non-farm payrolls and unemployment rate updates, which are due out later today. Crude has been under pressure all week as economic data that has been coming out in the US and China turned out to be disappointing and raised doubts about the strength of the ongoing economic recovery, while also triggering speculation about the possibility of a double dip recession.

On Thursday, US employment data showed that jobless claims unexpectedly increased by 13,000 last week, taking the total to 472,000, compared to an increase of 57,000 in May. This followed negative manufacturing updates that came out in China and the US today, showing declines in China’s and US PMI (Purchasing Managers Indexes) from 53.9 to 52.1 and from 59.7 to 56.2 respectively.

August Brent Crude declined to US$72.40/barrel, while US light, sweet crude for August delivery slipped to US$72.89/barrel.

Blue chip oil and gas producers were on the rise today. BP (LON:BP) posted a marginal gain, while fellow supermajor Shell (LON:RDSB) added 1%. BG Group (LON:BG) and Tullow Oil (LON:TLW) advanced 2.4% and 4.5% respectively, while Cairn Energy (LON:CNE) tacked on nearly 5% to take the lead in the sector.

Amec (LON:AMEC) added less than 1%, while another oil and gas engineering firm Petrofac (LON:PFC) did better, advancing 2.3%.

Midcaps followed. Dana Petroleum (LON:DNX) rallied 19% after confirming a takeover approach. Premier Oil (LON:PMO) followed with a 7% surge. Heritage Oil (LON:HOIL) and JKX Oil & Gas (LON:JKX) climbed 3.5% and 3% respectively. Soco International (LON:SIA) rose 2.4%, while Dragon Oil (LON:DGO) and Melrose Resources (LON:MRS) added more than 1.5%.

Salamander Energy (LON:SMDR) was flat.

Service companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) were in demand, advancing 4.7% and 4.4% respectively.

EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) plummeted 23% after reporting that Italy considered introducing offshore drilling restrictions.

Most other juniors followed the positive trend in the sector. Irish oil and gas exploration company Petroceltic International (AIM: PCI), which said it would not be affected by an offshore dirlling ban in Italy, led the way with a 10.5% rally with North Sea explorers Xcite Energy (AIM: XEL) surging 10% to challenge for the lead.

Western Europe operating oil and gas company Northern Petroleum (AIM: NOP), which also assured investors today that its operations would not be affected by Italy’s decisions on offshore drilling, followed with a 9% gain. North American based explorer Nighthawk Energy (AIM: HAWK) joined the party with a 8% gain.

Gold bounces back, silver and platinum rise

Gold recovered from Thursday’s sharp falls, surging to US$1,211/oz this morning after shedding more than 3% yesterday to slip below the key US$1,200/oz level. Despite this week’s massive selloff in the markets that was triggered by disappointing data released in the US and China, investors were increasingly dumping the safe-haven gold to reap gains from the yellow metals’ recent rally that almost drove it to US$1,300/oz and make up for the losses in equity markets.

Silver and platinum moved along, climbing to US$18.03/oz and US$1,507/oz respectively.

Major mining stocks were in demand today. Randgold Resources (LON:RRS) led the sector in the FTSE 100 with a 2.2% advance, while fellow gold miner from the FTSE 250 Petropavlovsk (LON:POG) followed with a 2.1% gain. Platinum miner Lonmin (LON:LMI) advanced 1.8% and silver miner Fresnillo (LON:FRES) posted a small gain.

Aquarius Platinum (LON:AQP) led the midcaps with a 3.6% rally. Silver producer Hochschild Mining (LON:HOC) added 1%.

Blue chip specialty chemicals firm Johnson Matthey (LON:JMAT) rose 1.3%.

Small caps did not show much movement today.

Copper and nickel rise to lift miners

Base metals were on the rise today with copper and nickel climbing to US$2.91/lb and US$8.62/lb, while zinc reached US$0.80/lb.

Base metal miners did well today. Xstrata (LON:XTA) rallied 4.3% to take the lead in the sector. Kazakhmys (LON:KAZ) advanced 3.5%, while Eurasian Natural Resources (LON:ENRC) tacked on almost 3%, Vedanta Resources (LON:VED) moved up 2.5% and Antofagasta (LON:ANTO), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) added just over 2%. Anglo American (LON:AAL) climbed 1.7%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, advancing 2.2%.

Uranium and copper explorer Kalahari Minerals (AIM: KAH) was among the top performers in the sector with a 5% gain. Russia focused copper and nickel miner Amur Minerals (AIM: AMC) headed in the opposite direction, slipping 8%.

Banks, insurance, private equity

Financial stocks were on the rise today. Barclays (LON:BARC) and Lloyds (LON:LLOY) led the banking sector with gains of 5%. Royal Bank of Scotland (LON:RBS) and Standard Chartered (LON:STAN) rose 1.7% and 1.4% respectively. HSBC (LON:HSBA) posted a small gain.

Insurers also did well. Aviva (LON:AV) was in the lead with a 3.1% advance. Old Mutual (LON:OML) and Standard Life (LON:SL) added just over 1%. Admiral Group (LON:ADM), Legal & General (LON:LGEN) and Prudential (LON:PRU) tacked on less than 1%.

RSA Insurance Group (LON:RSA) was flat.

Private equity group 3i (LON:III) declined 1%.

Small Cap Movers

Other notable movers among the small caps included offshore marine renewables development company SeaEnergy (LON:SEA) with a 5.5% loss and mobile email and data synchronisation group Synchronica PLC (AIM: SYNC), which rallied 20%.

Small Cap News

Extract Resources (ASX, TSX, NSX: EXT) has reported "exceptional" infill drilling assay results and the emergence of a new zone of uranium mineralisation at Rössing South, part of its world-class Husab Uranium Project in Namibia.

Xcite Energy (LON:XEL, TSX:XEL) has selected the Ocean Nomad semi-submersible rig, to drill 9/3b-R well on the Bentley field in the North Sea. The company said it expects to conclude the final rig contracts shortly, and the drilling will get underway with an anticipated spud date at the end of August.

Yesterday, the Italian Ministry of the Environment revealed plans to restrict offshore hydrocarbon activities around its coastline. The Italian Minister of Environment, Stafania Prestigiacomo, announced an outline proposed decree to amend the Italian Environmental Code, to ban drilling within 5 miles of the Italian coastline and 12 miles around designated, protected marine and coastal areas. This morning a number of UK-listed oil and gas explorers updated investors on how the proposal may, or may not, affect their projects in the region, should the proposed decree become law. Northern Petroleum (LON:NOP), Petroceltic International (LON:PCI) and Mediterranean Oil & Gas (LON:MOG) all issued statements.

In an in-depth report on Cinpart (LON:CINP), Edison Investment Research said the market opportunity for voltage optimisation equipment looks very significant, with rising electricity prices shortening the payback period, and carbon reduction initiatives driving demand.

Mariana Resources (LON:MARL) and Cliffs Natural Resources (NYSE:CLF)  have now signed a definitive agreement in respect of their proposed joint venture to explore the SCM Mariana Area (SCM), which covers 92,000km² in north-central Chile.

Large and Mid Cap News

Australia’s new Prime Minister Julia Gillard wasted little time overturning the controversial mining supertax law that many believe sealed the fate of her deposed predecessor Kevin Rudd. This piece of legislation will be replaced with a Mineral Resource Rent Tax (MRRT), which will be imposed only on iron ore and coal resources from 1 July 2012 and will not be applied retrospectively. This decision enjoyed a warm welcome from Australia operating mining giants including Rio Tinto (LON, ASX:RIO), BHP Billiton (ASX: BHP; LON: BLT) and Xstrata (LON:XTA).

In its 'Daily Oil & Gas Filter', broker Westhouse called Dana Petroleum (LON:DNX) an “attractive target” with further upside potential after the midcap oil and gas producer confirmed a takeover approach that caused its share price to balloon 15% this morning on top of yesterday’s 5% gain.

The Royal Bank of Scotland Group (LON:RBS) has received US$1.6 billion, following the completion of the previously announced sale of a commodities trading business to  JP Morgan Chase (NYSE:JPM). Earlier this year, the companies agreed the deal which sees the major US financial institution acquire RBS Sempra Commodities’ (RBSSC) Metals, Oil and European Energy businesses.

InterContinental Hotels Group (LON:IHG) has sold its 422 room InterContinental Buckhead Atlanta to Maryland based Pebblebrook Hotel Trust for US$105 million in cash. The move is in line with its strategy to reduce capital intensity and grow its management and franchise businesses as it will still manage the hotel under a long term contract.

In an update on its H1 trading, the UK’s largest builders' merchant, Travis Perkins (LON:TPK) said the strong rebound, reported earlier this year, continued over the course of the whole six-month period and as a result the company now expects its H1 results to be ahead of management expectations.

Brit Insurance Holdings (LON:BRE) has rejected Apollo Global Management’s improved takeover offer of £10.50 per share, stating that the price “undervalued” the company. However, it remains open to a sweetened offer should the US-based private equity firm be prepared to make one.

Emerson Electric (NYSE:EMR) and Chloride Group (LON:CHLD) are set for a merger after the FTSE250 constituent's board unanimously recommended Emerson's 997 million bid, made on 29 June. The recommendation concludes the long-running tug-of-war between Emerson and its rival ABB Limited (NYSE:ABB).

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