Overview
UK jobless data released this morning reported 220,000 jobs were lost in the three months to June, bringing the total number to 2.44 million - the highest unemployment level since 1995.
The news initially delivered a blow to the Footsie, which has struggled to get back to positive territory after falling for two straight days this week, retreating from the strong gains it made last week. The top-tier index barely held on to the opening level shortly after trading opened, but then quickly slipped into the red despite a modest rebound in financial stocks and strong gains by a few companies, including construction and engineering group Balfour Beatty.
The Bank of England’s quarterly inflation report, which was delivered later in the morning, once again said the recession was deeper than feared, forecasting a slow and protracted recovery. Yet Governor Mervyn King said there has been encouraging signs in the global economy, which helped the FTSE 100 recoup early losses and move higher.
The FTSE 100 finished the day up almost 50 points, climbing well over the 4,700 mark.
Key movers
Balfour Group (LSE: BBY) soared over 7% after releasing interim results, further bolstering the FTSE 100, which also received strong support from the partly nationalized Lloyds Group (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS). Both banks gained 5-6%, recovering some of their losses earlier this week. Last week RBS released disappointing interim results and Lloyds was reported to be mulling a multibillion cash call to avoid participating in the government’s asset protection scheme (APS). Barclays (LSE: BARC) also joined in with a 2.2% gain. HSBC (LSE: HSBC), however, failed to catch the momentum and finished in the red.
Insurers also turned losses into gains today with majors Legal & General (LSE: LGEN), Aviva (LSE: AV) and Friends Provident (LSE: FP) advancing 2-4%. Oil stocks were off to a recovery after declines in oil price dragged the sector down yesterday. UK based oil and gas producer BG Group (LSE: BG) got a boost from ING, which upgraded the stock from “sell” to “hold,” bringing a slight relief to the energy sector as oil prices continued their fall into Wednesday. The oil and gas player added 3.2%. With the exception of BP (LSE: BP), which declined marginally, energy stocks were in the blue today.
Other notable movers included airline British Airways (LSE: BAY), which was up 2% today despite issuing a warning to investors over possible strikes after discussions between the airline and the cabin crew’s union broke down.
In the red
Miners flooded the fallers list in the morning, but reversed early losses later in the day as metal prices inched higher. Silver miner Fresnillo (LSE: FRES) emerged as the top faller in the FTSE 100 with a 4% retreat, but later brought losses down to just over 1%. Rio Tinto (LSE: RIO) fell marginally on confirmation that some of its executives were formally charged with spying and bribery in China, where they have been held in custody since early July. Kazakhstan’s biggest miner and FTSE 100 constituent Kazakhmys also slipped, albeit barely.
Fresnillo’s pole position on the fallers list was taken over by Europe’s largest tour operator TUI Travel (LSE: TT), which said it expected to meet the full year expectations while reporting a 57% hike in profit amid slumping revenues in the quarterly report it released today, projecting the market conditions to remain challenging. The company fell 4%, while rival Thomas Cook Group (LSE: TCG), which is set to release own results tomorrow, joined in with a 2% slide.
Utility companies also contributed to the decline as water utility and waste management firm Pennon group (LSE: PNN) slipped 3.6%, while RSA Insurance also went against the tide, slipping almost 3% while other insurance majors were on the rise throughout the day.
FTSE 250
The top-tier index outperformed the FTSE 250, which was just above the opening level at the end of the day, also bouncing back from early losses. The LSE’s second echelon received a boost from a number of companies that posted good gains today. Notable risers included Emerald Energy (LSE: EEN), whose stock price leaped almost 10% after the company agreed to a takeover offer from China’s state run Sinochem Corp, which valued the company at £532 million or 750p per share, marking a significant premium to yesterday’s closing price of 675p per share.
Housing and development group Taylor Wimpey (LSE: TW) rose 3.6%, giving a boost to the construction sector. Bakery chain Greggs (LSE: GRG) gained 3.3% after posting a £16.5 million profit in the first half and said it planned to launch 40 new stores this year.
But Micro Focus International (LSE: MCRO) dropped 6.2% after brokerage Numis downgraded it to “add” from “buy” following a Q1 update from the software group, which stated trading was broadly in line with estimates. Pub groups Greene King (LSE: GNK) and Enterprise Inns (LSE: ETI) both slipped 5.4%.
Second-tier utility companies also showed up among the leading fallers with Northumbrian Water Group (LSE: NWG) declining 4.7%, echoing FTSE 100 water company Pennon Group’s 3.4% loss.
Commodities
The Organization of Petroleum Exporting Countries (OPEC) projected that oil prices may decline next year as the economic recovery has been progressing at a slower pace than expected.
Key oil benchmarks fell on the news, but recovered later in the day after the International Energy Agency (IEA) countered OPEC’s projections, raising its oil consumption forecasts for 2009 and 2010 by 190,000 and 70,000 barrels a day respectively in a monthly report released in the afternoon.
US Light crude inched closer to US$70 per barrel, arriving at US$69.45, while Brent climbed back above US$72 per barrel.
Oil and gas sector: majors and midcaps steady, juniors soar
Oil stocks were in the buying mode today thanks to merger & acquisition speculation after Emerald Energy announced a £532 million offer from China’s state run Sinochem Corp.
BG Group (LSE: BG) managed to surge back above 1,000p per share, adding 3% shortly after trading opened. While BP (LSE: BP) was slightly in the red, another supermajor Shell (LSE: RDSB) added almost 2%.
Midcaps followed with gains as Bangladesh and Nepal operating Cairn Energy (LSE: CNE) added 2%, while Dragon Oil (LSE: DGO) and Tullow Oil (TLW) rose 1.5-2%. Dana Petroleum (LSE: DANA) also gained 1.5%.
Some juniors made steeper gains with Europe focused oil and gas developer Ascent Resources (AIM: AST) soaring 14% and Gulfsands Petroleum (AIM: GPX), an oil and gas company with assets in Iraq, Syria and Gulf of Mexico shooting up over 12%. Kurdistan and Algeria explorer Gulf Keystone Petroleum (AIM: GKP) climbed 6%, Ukraine focused gas producer Regal Petroleum (AIM: RPT) rose 2.5% and US focused Empyrean Energy (AIM: EME) added 3%.
Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and Italian focused oil and gas junior Mediterranean Oil & Gas (AIM: MOG) joined the party with equal gains of 2.4%. US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) moved up 3%. Energy investor Xtract Energy (AIM: XTR) rose 4%.
Precious metals recover
Gold climbed slightly, reaching US$946 per ounce. Silver rallied back to US$14.43/oz and Platinum remained around to US$1,238/oz.
Apart form the fluctuating prices, the sector was also impacted by major platinum miner Aquarius Platinum (LSE: AQP), which posted a full year net loss of US$45.7 million and reported an output slump stemming from the shutdown of its Everest mine last year. The company initially declined 1% on the news, but recovered to post an equal gain. Johnson Matthey (LSE: JMAT) remained on positive ground with marginal gains and Lonmin was able to post a 3.7% gain.
Silver miner Fresnillo (LSE: FRES) lost 1.5% and FTSE 250 silver miner Hochschild Mining (LSE: HOC) recovered from early losses to finish flat.
Gold miners Peter Hambro Mining (LSE: POG) and Randgold Resources (LSE: RRS) also overturned early losses to finish with gains of 2% and 1% respectively.
Juniors generally failed to reverse losses and finished deep in the red. Australian gold and copper prospector Oxus Gold (AIM: OXS) and Africa focused gold deposit developer Cluff Gold (AIM: CLF) dipped 6% and 5.5% respectively. UK gold miner Mercator Gold (AIM: MCR) and Australian gold producer Leyshon Resources (AIM: LRL) got little help from the recovery in the sector and each dropped almost 5%. South American mineral explorer Horizonte Minerals (AIM: HZM) and junior platinum miner Platmin (AIM: PPN) both lost 3.5%. Kazakhstan operating gold miner Frontier Mining (AIM: FML) pulled back 5% and Argentina focused gold explorer Patagonia Gold (AIM: PGD) slipped 3%.
Copper and gold developer EMED Mining (AIM: EMED) and Philippines focused gold producer Medusa Mining (AIM&ASX: MML) both moved against the trend, rising 6.2% and 4.5% respectively. Tajikistan operating gold miner Kryso Resources (AIM: KYS) also outperformed the sector, posting a 10% hike.
Base metal miners mixed
Base metal prices did not show much movement over the course of the day. Copper held on to US$2.73/pound, Zinc improved to US$0.81 per pound, while Nickel partially recovered from losses, moving up to US$8.82 per pound.
With the exception of Rio Tinto (LSE: RIO), all major base metal miners were in the blue today. Anglo American (LSE: AAL) and Kazakhmys (LSE: KAZ), Vedanta Resources (LSE: VED) and Antofagasta (LSE: ANTO) rose marginally, while BHP Billiton (LSE: BHP) was able to tack on 1.8%.
Junior stocks were more volatile. Australia focused coking coal producer Caledon Resources (AIM: CDN) and uranium and copper explorer Kalahari Minerals (AIM: KAH) both rose, adding 4% and 2% respectively. South America focused zinc miner Herencia Resources (AIM: HER), which did not release any statements or updates today, soared over 33% to emerge as the leading riser in the sector, but Iron ore, magnesium and uranium explorer Red Rock Resources (AIM: RRR) slipped 12%.
Insurance, banks, private equity
Unlike other major banks, Standard Chartered (LSE: STAN) opened in the red, but managed to get back to the opening level by the end of the day.
Not all major players in the insurance sector were able to ride the momentum to gains and some declined. Insurer Old Mutual (LSE: OML) and Standard Life (LSE: SL) both moved down less than 1%, while RSA Insurance Group (LSE: RSA) slipped almost 3%.
Prudential (LSE: PRU) rose 1.7%.
Other Small Cap Movers
Environmental science and technology company Accsys Technologies (AIM: AXS) was volatile again, slipping over 4% after making solid gains on Tuesday. Medical technology company Biocompatibles International (LSE: BII) rose over 1.5%, but crop nutrition and protection specialist Plant Impact (AIM: PIM) retreated 2%. Latin America operating power producer Rurelec (AIM: RUR) dipped 4%.
Large and Mid Cap News
Royal Bank of Scotland Group PLC (LSE: RBS) has reached agreement in principle for the sale of its 99.37 percent holding in The Royal Bank of Scotland Ltd (RBS Pakistan) to MCB Bank Ltd, formerly Muslim Commercial Bank, for approximately US$87 million. RBS Pakistan is listed on the Karachi stock exchange. The transaction is subject to regulatory approvals and is expected to complete in the fourth quarter of 2009.
The world’s largest miner BHP Billiton (LSE: BLT) revealed full year profits were down 62% to US$5.9 billion, while the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) declined 21% to US$22.3 billion and revenues dipped 16% to US$50.2 billion.
Engineering, construction and services group Balfour Beatty PLC (LSE: BBY) reported a solid rise in revenues and profit for the first half and separately announced that it has been selected as an alliance partner for the delivery of South West Water's maintenance and replacement programme. The company increased total revenue to £5.07 billion in the six months to June 27 2009 from £4.33 billion a year earlier, generating pretax profit before exceptional and amortisation of £108 million, up from £95 million last year. It is raising the interim dividend by 8 percent to 5.5 pence a share.
Anglo American PLC (LSE: AAL) announced it plans to sell its 49.5 percent holding in Southern Africa focused agri-processing business Tongaat Hulett Ltd to institutional investors via an accelerated bookbuild and an exchangeable bond issue. Anglo is offering its entire holding of 51.2 million Tongaat shares. It did not provide pricing details.
TUI Travel (LSE: TT) reported a 57% jump in Q3 profits and reiterated that it expected to meet full year expectations despite “challenging market conditions.” The company’s revenue for the quarter ended 30 June 2009 slipped 1% to £3.57 billion, but underlying operating profit jumped 57% year on year to £102 million as the company cut the number of holiday packages offered, but raised the prices to adapt to the changing market conditions, TUI said in the quarterly report released today.
China's state-held Sinochem Corp is buying Emerald Energy PLC (LSE: EEN) in a recommended 750 pence per share cash deal, valuing the UK oil and gas explorer at approximately £532.1 million, the companies said in a statement. The offer represents a premium of nearly 34 percent over the closing price of 560.50p on July 10, the last trading day before Emerald announced that it had received an approach. The shares closed at 675 pence yesterday. Following the announcement this morning, Emerald stock shot up more than 9 percent and was at around 736 pence in midmorning trade.
MITIE Group PLC (LSE: MTO) said it is buying the UK technical facilities management operations of Dalkia PLC, controlled by French utility groups Veolia Environnement and EDF, for up to £130 million in cash. It also announced a fully underwritten placing of 19 million new ordinary shares, representing approximately 6 percent of MITIE's currently issued share capital, with institutional and certain other qualifying investors to raise at least £40 million before expenses.
Small Cap News
Birmingham City PLC (LSE: BMC) confirmed it has received an approach from 29.9 percent shareholder Grandtop International Holdings Ltd which may or may not lead to an offer for the entire issued share capital. Grandtop is the investment company of Hong Kong businessman Carson Yeung and acquired its holding in 2007. The statement came in response to press reports putting the amount that Yeung is paying £70 million for the remaining holding in the football club. The Sun reported this amount is 20 million higher than what Yeung planned to pay in his failed previous takeover attempt two years ago. He failed to raise the required amount of cash after initially spending £15 million on the 29.9 percent stake.
Platinum development company, Nkwe Platinum (ASX: NKP) has announced it will raise $7.5 million at 25 cents per share via a placement to sophisticated and institutional investors. A free 24 month option (35 cents) for every two shares held will be attached. Reflecting the increasing value inherent in the Garatau / Tubatse project, investors have driven the Nkwe share price up from 12 cents earlier this year to 28 cents. With market capitalisation now at $150 million, the market is now recognising the value in the project. Nkwe Platinum is developing the project in partnership with Xstrata (LSE: XTA).
Cash machine deployer Cashbox PLC (AIM: CBOX) said the UK interbank ATM network LINK is opening its network to Chinese cardholders, and the company will provide the ATM that will be used for a symbolic withdrawal at a ceremony in London today. Chinese bankcard association China Unionpay (CUP) is now connected to the LINK network, which means that more than 1.8 billion cards issued to Chinese account holders can now be used to withdraw cash through LINK's 64,000 ATMs.
UK and Canadian listed mineral exploration and development junior, Rambler Metals and Mining (TSXV: RAB, AIM: RMM) said it had entered into exclusive talks to acquire the Nugget Pond processing facility from Crew Gold (TSX: CRU). The processing facility is situated only 40 kilometres from Rambler’s Ming Copper-Gold Mine on the Baie Verte Peninsula in Newfoundland. By acquiring the facility, Rambler would improve the economics of developing the Ming Mine. Rambler said the processing facility would require a copper flotation circuit but was otherwise in good condition.
High grade, low cost gold producer, Medusa Mining (ASX: MML) has defined a maiden JORC inferred resource at the Bananghilig Gold Deposit in the Philippines of 650,000 ounces of gold at 1.3 g/t. Medusa's main asset is the Co-O gold mine on the southern Filipino island of Mindanao, which has a JORC resource of 1.38 million ounces of gold at an average grade of 10.8 g/t.
Shares in EMED Mining Public Ltd (AIM: EMED) held onto gains throughout the London session today after saying this morning that shareholders at its EGM approved the issue of 38.1 million shares to raise £2.7 million net for progressing the Rio Tinto copper project in Andalucia, Spain, and paying off a loan to avoid shareholder dilution.
The stock was still trading up 6.25 percent in midafternoon deals.