Overview: the Footsie was in recovery mode today after two days of steep falls, when it was hit by a combination of plunging commodity prices and sharp corrections across global stock markets. Markets were still reeling from last Friday’s Consumer Price Index (CPI) reading in the US, which showed no progress in July and marked a 2.1% fall over the past 12 months, the sharpest in almost 60 years.
US futures were up in the morning, pointing to a recovery in the market. The Dow later opened with a 35 point climb, further lifting the Footsie, which got off to good gains in early trade.
The market was in buying mode in the morning, adding over 30 points, yet a later slide trimmed its early gains to just 10 points after yet more bad news arrived from the US, where housing starts unexpectedly fell in July, even though starts for single-family homes, the segment which was crippled the worst by the recession, rose for a fifth month in a row reaching the highest annual rate since October.
However, the market later recovered after HSBC’s rating was lifted to “buy” from “neutral” by broker Goldman Sachs on a better outlook for its US unit, saving the day for the Footsie.
Key movers: in the blue
Miners, which led decliners for the past two sessions, were on the leaderboard, accompanied by financials and oil stocks.
The UK’s biggest electricity producer International Power (LSE: IPR), which posted solid gains after reporting a hike in H1 operating profits, joined the group with a 1.5% climb. InterContinental Hotels Group (LSE: IHG) also rose 2% amid numerous reports of an alleged publicity stunt. IHG made quite a few headlines today after a booking error on its website allowed customers to book a total of 1,400 room nights at its Crowne Plaza Venice East hotel for €0.01, causing a total loss of €90,000, but garnering the group extensive media coverage.
Engineering and construction firm Amec (LSE: AMEC) later emerged as the leader of the top tier index after winning a solar plant project at Colorado State University, climbing 5%.
Aerospace and defence system manufacturer Cobham plc (LSE: COB) and utility provider Centrica (LSE: CNA) also joined in with gains of 2% and 1.5% respectively.
Key movers: in the red
Fallers were led by the commercial property sector, which has been on a winning streak, fuelled by rumours of an imminent takeover of property investor British Land (LSE: BLND) by a consortium led by UK’s richest man Lakshmi Mittal, who allegedly approached Credit Suisse to get funding for the $10 billion deal. However, the company refuted the reports today, also saying it had no deal in place to sell its £2.3 billion Broadgate office centre in London and reporting a 3.7% quarterly decline in its portfolio valuation.
The company offered a brighter outlook for the property sector, saying the yields were evidently strengthening and the portfolio valuation declines were slowing down. However, the refuted takeover rumours and the lack of a buyer for Broadgate brought British Land’s stock down over 3%, still giving away the gains made on the takeover speculation. Land Securities Group (LSE: LAND) and Liberty International (LSE: LII) both fell 1.5% in sympathy.
Engineering company Invensys (LSE: ISYS) later joined the leading fallers with a 2.5% decline.
Commodities
Oil prices showed signs of a rebound early, but slid to lower levels by the end of the day. US light crude was down to US$66.2/barrel, while Brent Crude failed to hold on to the US$70 barrier and retreated to US$69.42/barrel.
Oil and gas sector: majors recover, juniors post big gains
Oil & gas majors and midcaps opened in the positive, but their gains were later trimmed. BP (LSE: BP)’s early gains were eliminated, while fellow supermajor Shell (LSE: RDSB) ended up in the red.
Midcaps Dragon Oil (LSE: DGO), Tullow Oil (LSE: TLW) and Dana Petroleum (LSE: DNX) added 0.5%, 2% and 1% respectively. Cairn Energy (LSE: CNE) performed strongly in the morning, but finished with a 1% rise. BG Group (LSE: BG) also finished in the blue. Heritage Oil (LSE: HOIL) was volatile, initially falling, but rebounded to finish flat today.
Junior energy companies were much more volatile.
Europe focused oil and gas developer Ascent Resources (AIM: AST) hiked 17% following today’s announcement of the commencement of the drilling at its Gobehaza-1 well in Hungary to evaluate a primary gas target estimated at a depth of 1,200 metres.
Another junior Dominion Petroleum (AIM: DPL) perked up 20% after the suspension of its shares was lifted, and it reported that it had secured US$10 million in equity funding from BlueGold Capital Management.
Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and Iraq operating Irish oil company Petrel Resources (AIM: PET) followed with own solid gains, jumping 15% and 10% respectively.
US focused Empyrean Energy (AIM: EME) caught up with the leaders with a strong 15% advance on the heels of yesterday’s announcement that the company was mobilising a rig to drill the Quinn £h well at the Riverbend project in Texas.
Latin America and US operating oil producer Pan Andean Resources (AIM: PRE) followed with a 4% gain, but Gold Oil (LSE: GOO) went against the tide with a 6% slip.
Precious metal miners take a step back, juniors mixed
Gold partially rebounded from the big losses it has sustained since Friday’s CPI update, climbing to US$935/ounce. Other precious metals also recovered early, but their surge also came to a halt in the afternoon as Platinum retreated US$4 to US$1,229/ounce and Silver slipped below yesterday’s levels, arriving at US$13.91/ounce.
The cushion provided by the small increases in metal prices was not enough to prevent the mining sector from sliding back into the negative after an inspiring start on Tuesday.
Platinum miner Aquarius Platinum (LSE: AQP) was down 1% at the end of the day, as was silver producer Fresnillo (LSE: FRES) and fellow platinum miner Lonmin (LSE: LMI).
Specialty platinum catalyst firm Johnson Matthey (LSE: JMAT) outperformed the sector and rose almost 2%.
Gold producers fared slightly better as Randgold Resources (LSE: RAND) and Peter Hambro Mining (LSE: POG) declined marginally.
Juniors were more volatile closer to the end of the day after a very slow start. Stratex International raked in a 13% gain off the back of interim results today accompanied by positive comments from house broker HansonWesthouse.
Uzbekistan focused gold miner Oxus Gold (AIM: OXS) and copper and gold miner EMED Mining (AIM: EMED) tacked on 9% and 6% respectively.
Notable fallers included nickel and platinum focused Australia and South Africa operating miner Braemore Resources (AIM: BRR) and Australian gold and copper prospector Solomon Gold (AIM: SOLG), which both dropped over 8.5%. Tajikistan operating gold miner Kryso Resources (AIM: KYS), shed 8%.
Base metal miners stay on positive ground
Base metal prices also moved with the market, retreating slightly, but the miners were mostly able to stay above the water.
Copper was back down to US$2.69/pound, Nickel shed 40 cents form the morning levels, plummeting to US$8.59/pound, while Zinc slipped just below US$0.80/pound.
Majors Anglo American (AAL), Antofagasta (LSE: ANTO) and BHP Billiton (LSE: BLT) barely held on to the opening levels, ending the day with marginal gains.
Copper miner Kazakhmys (LSE: KAZ) and Rio Tinto (LSE: RIO), which found a buyer for US$2 billion worth of its assets today, upped over 1%.
Vedanta Resources (LSE: VED) was the only faller in the pack.
FTSE 250 iron ore miner, Ferrexpo, (LSE: FXPO) climbed 1.5%.
Base metals juniors were largely unmoved though there were a few exceptions. Iron ore play Red Rock Resources (AIM: RRR) climbed 14%, Nickel and Iron Ore play Landore Resources (AIM: LND) climbed 3% and nickel laterite play Rusina Mining (AIM: RMLA) rose 7%, while Regency Mines (AIM: RGM) climbed 6%.
Banks, insurance, private equity
Financials were largely positive today, but Barclays (LSE: BARC) slipped into the red one day after JP Morgan asked the Financial Services Authority to review the compensation package that could be worth up to £50 million that Barclays offered to a team of traders, hoping to snatch them over to its own investment division Barclays Capital. The bank is also in the middle of a row over doling out several million pounds to Barclaycard Anthony Jenkins for a promotion that never came to pass. The bank was down 1.3%.
Other major banking groups Lloyds (LSE: LLOY), HSBC (LSE: HSBA) and Royal Bank of Scotland (LSE: RBS) rose 1-2%.
Insurers also basked in the sun. Legal & General Group (LSE: LGEN) added 3.7%, while Aviva (LSE: AV) and Friends Provident (LSE: FP) raked in 1.7%. Old Mutual (LSE: OML) rose marginally.
However, Prudential (LSE: PRU) went against the tide and finished in the negative, as did fellow insurer Standard Life (LSE: SL).
Small Cap Movers
Notable movers among small caps included computer-Aided Detection (CAD) and image analysis software specialist, Medicsight (AIM: MDST) with a 44% climb.
Large and Mid Cap News
Dana Petroleum PLC (LSE: DNX) said first oil production has begun from the Ettrick field, located in blocks 20/2a & 20/3a of the UK continental shelf. The field is being produced via the leased 'Aoka Mizu' FPSO (floating production, storage and offloading) vessel, which is designed to handle 30,000 barrels of oil per day (bopd) and 35 million cubic feet of gas per day.
London and Melbourne headquartered mining group Rio Tinto (LSE: RIO) said it has received a US$2.025 billion binding offer from Amcor for the majority of its Alcan Packaging businesses. Amcor, a global packaging group, has put forward a binding offer for Alcan’s global tobacco, food Europe and food Asia divisions. Alcan’s food Americas division was recently sold to Bemis Company Inc for US$1.2 billion, which leaves it with the Beauty packaging division, which will be disposed of separately, Rio Tinto said in the statement.
Property development and investment company British Land (LSE: BLND) gave a boost to the outlook for the commercial property sector today by posting smaller quarterly losses and reporting a slowdown in the decline on its portfolio valuation amid improving yields and stronger interest from investors. The update did little to help the sector today however, with British Land and other commercial property companies falling 1-3%.
FTSE 250 constituent marine services group Fisher (James) and Sons Plc (LSE: FSJ) said today it has agreed to acquire nuclear and space engineering company MB Faber Ltd in a cash only deal that could be worth up to £5.25 million.
Small Cap News
China-focused environmental engineering group Tinci Holdings Ltd (AIM: TNCI) said it will focus its efforts on the flue gas desulfurization (FGD) market in the remainder of 2009, targeting small to medium size companies, as it announced first half numbers which were badly hit by the ongoing harsh competition for orders from large customers.
Shares in Dominion Petroleum Ltd (AIM: DPL) had their suspension lifted this morning and promptly shot up after the Africa-focused group released a flurry of news statements, including results for the full year to end-December 2008 and news of a US$10 million equity funding from BlueGold Capital Management Ltd along with a re-financing.
Ascent Resources PLC (AIM: AST) said drilling has begun of the Görbeháza-1 well, located in the western part of the Nyírség Szatmár permits in Hungary, known as the Panhandle. Drilling is expected to take about ten days and will evaluate a primary gas target estimated to be at a depth of 1,200 metres. Shares in the oil and gas group were lifted by the news, trading up more than 15 percent in early deals.
Uranium focused exploration and development junior, Forte Energy (ASX & AIM: FTE) took the first step in divesting of its Millenium Copper Project, Queensland, Australia. Forte has stated repeatedly that it was looking at its options for the project, after the company’s focus shifted towards uranium exploration in West Africa.
Agricultural sector focused Agriterra Limited (AIM: AGTA) announced today it has worked out an agreement with Equatorial Palm Oil Plc (EPO) to acquire palm oil developer Equatorial Biofuels (Guernsey) Limited (EBF) for US$2.5 million in cash and 110,000,000 ordinary shares in the company.
Canadian focused, London listed Landore Resources (AIM: LND) confirmed that it had received assays for the final six holes that were part of a 8,764 meter infill drill program at the company’s B4-7 nickel-copper-cobalt-platinum group elements project.
MCB Finance Group plc (AIM: MCRB), the consumer finance company providing flexible credit solutions to retail customers in Finland, Estonia, Latvia and Lithuania provided a trading update ahead of the publication of its interim results for the six months ended 30 June 2009.
Junior exploration group Stratex International PLC (AIM: STI) said that despite the major challenges facing its industry, it has turned a significant corner and is now positioned to grow strongly. It is also considering looking beyond its current focus of interest, Turkey.
Debt management solutions and unsecured and secured finance provider, Relax Group (AIM: RLX) plunged 18% after the company warned that its results for first six months of 2009 would be “significantly” lower than the five month period ended 31 December 2008.
IT services business FDM Group PLC (AIM: FDMG) reported a slight fall in interim revenues and pretax profit, saying the six months to end-June 2009 have proved to be very challenging and it fully expect this trend to continue.
Parent company of The Share Centre, Share PLC (AIM: SHRE) reported solid first half results this morning, including a 16% surge in turnover to £6.9 million and 136% increase in operating profit to £1 million. Shares in Share PLC have performed well in recent months, so despite the good results this morning, were little changed in trading today.
Maple Energy PLC (AIM: MPLE), an independent energy company with assets and operations in Peru, was badly hit by falling oil prices, which nearly halved revenues in the first half to end-June 2009 and caused a massive pretax loss of US$15.5 milion, compared to a profit of US$1.5 million in the previous first half.