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FTSE 100 inches lower as Serco, Reed Elsevier, Man Group, National Grid, Vodafone and Tesco weigh

Overview: the FTSE 100 was in decline today, however, by much less than expected as the blue chip index stood just 11 points or 0.2% below the opening level at mid afternoon ahead of the final reading of UK GDP for the final quarter of 2009, which is due tomorrow with analysts expecting a small increase to mark the beginning of Britain’s recovery from the worst recession in more than 60 years.

The market will also be awaiting updates from the US where existing home sales data is due today and the Fed’s announcement on interest rates is set for Wednesday.

Insurer Legal & General (LSE: LGEN) found itself atop the leaderboard today with a gain of 3.5%. Banking stocks recovered today with RBS (LSE: RBS), Standard Chartered (LSE: STAN) and Barclays (LSE: BARC) adding more than 2%. Other notable risers included tour operator Thomas Cook Group (LSE: TCG) with a gain of 2%, fashion house Burberry (LSE: BRBY) and packaging group Rexam (LSE: REX), which both added more than 1.5%.

Business services company Serco Group (LSE: SRP) led the fallers with a loss of nearly 2%. Publisher Reed Elsevier (LSE: REL) and hedge fund manager Man Group (LSE: EMG) declined 1.5%, while National Grid (LSE: NG), mobile operator Vodafone (LSE: VOD), British American Tobacco (LSE: BATS), pharmaceutical company GlaxoSmithKline (LSE: GSK), power generation company International Power (LSE: IPR), retailer Tesco (LSE: TSCO) and beverage group SABMiller (LSE: SAB) all shed a little more than 1%.

US stocks are set to rebound from their biggest decline in 10 months as futures for the Dow Jones Industrial Average, the broader S&P 500 index and the technology focused NASDAQ composite rose about 0.5% this morning, signalling a higher open on Wall Street.


Oil prices firmed this morning after falling heavily after sharp declines in the US and Asian markets, which absorbed a heavy hit from US president Barack Obama’s proposals to curb risk taking in the banking sector by placing limits on trading activity, which could potentially cut profits at major banks, while more signs of a tightening monetary policy came out of the world’s second largest energy consumer China.

In London, Brent Crude for March delivery improved to US$73.36/barrel, while US light, sweet crude rose to US$74.81/barrel on the New York Mercantile Exchange.

Major oil and gas stocks didn’t show much movement early in the day. Supemajors BP (LSE: BP) and Shell (LSE: RDSB) remained unmoved, as did fellow FTSE 100 constituent BG Group (LSE: BG), while Tullow Oil (LSE: TLW) rose marginally and another blue chip Cairn Energy (LSE: CNE) lost less than 1%.

Engineering companies Amec (LSE: AMEC) and Petrofac (LSE: PFC) posted small gains.

Midcaps followed the trend and were little moved by early afternoon with the exception of Melrose Resources (LSE: MRS), which slipped 5.5% on no news. Dana Petroleum (LSE: DNX) and Salamander Energy (LSE: SMDR) also were in the red, posting small losses.

Dragon Oil (LSE: DGO) and JKX Oil & Gas (LSE: JKX) were flat, while Premier Oil (LSE: PMO) and Soco International (LSE: SIA) rose marginally. Heritage Oil (LSE: HOIL) took the lead with a 1.5% advance.

Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) moved along, gaining less than 1%.

Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG), EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) and Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) led the juniors with gains of 9.5%, 5% and 3.5% respectively.

Gold and silver rise as US Dollar weakens

Obama’s plans to tighten banking regulations toppled commodities last week, pushing gold down to a one month low at below US$1,100/oz, while the US Dollar showed weakness before today’s US existing home sales update, which is expected to show a decline of the number of existing homes sold.

The US Dollar index, which measures the greenback’s strength against a basket of six currencies, was down 0.3% today, with profit taking following last week’s rally also factoring in. The American currency was later supported by reports that Ben Bernanke would secure confirmation for a second term as Fed Chairman from the US Senate later in the week.

The yellow metal returned to US$1,100/oz, while silver climbed to US$17.13/oz and platinum, which has recently rallied on anticipated higher demand from newly established PGM (platinum group of metals) based exchange funds, moved down to US$1,539/oz.

Mining stocks were higher in London with platinum producers leading the way.

Platinum miner Lonmin (LSE: LMI) was in the lead with a 2.5% gain. Gold producer Randgold Resources (LSE: RRS) and silver miner Fresnillo (LSE: FRES) rose marginally.

Specialty chemicals firm Johnson Matthey (LSE: JMAT) was flat.

Aquarius Platinum (LSE: AQP) was the top performer in the sector in the FTSE 250 with a 2.4% improvement. Silver producer Hochschild Mining (LSE: HOC) added slightly less than 1%, while gold miner Petropavlovsk (LSE: POG) made little headway.

Fiji focused gold miner Vatukoula Gold Mines (AIM: VGM) was the top performer among the juniors, gaining 7.5% after reporting new mineralisations at its flagship Vatukoula mine. Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) and Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) followed, climbing 6.7%.

Turkey focused gold miner Ariana Resources (AIM: AAU) and Brazil focused gold miner Horizonte Minerals (AIM: HZM) headed in the opposite direction, shedding 7% and 4.5% respectively.

Miners steady as copper climbs

Base metals headed in different directions today as copper improved to US$3.35/lb, while nickel held steady at US$8.31/lb and zinc held steady at US$1.05/lb.

Blue chip miners also showed little movement today. Kazakhmys (LSE: KAZ) was the top performer in the sector with a 2% advance. BHP Billiton (LSE: BLT) and Vedanta Resources (LSE: VED) rose marginally, while Anglo American (LSE: AAL) and Antofagasta (LSE: ANTO) were flat.

Peers Eurasian Natural Resources (LSE: ENRC), Rio Tinto (LSE: RIO) and Xstrata (LSE: XTA) declined marginally.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) lost less than 1%.

African Aura Mining (AIM: AAAM) was among the top performers in the sector with a gain of nearly 5%.

Most other small caps were in decline. Zinc mining and recycling specialist ZincOX (AIM: ZOX) was down 5% after announcing a settlement with bond holders over its Jabali mine. Russia focused copper and nickel miner Amur Minerals (AIM: AMC), mineral sands producer Kenmare Resources (LSE: KMR) and copper and nickel explorer Regency Mines (AIM: RGM) all shed more than 3%.

Banks, insurance, private equity

Financial stocks were in buying mode today. Royal Bank of Scotland (LSE: RBS) and Standard Chartered (LSE: STAN) were up 2%, while Barclays (LSE: BARC) followed with a 1.7% climb. HSBC (LSE: HSBA) and Lloyds (LSE: LLOY) added less than 1%.

Legal & General Group (LSE: LGEN) led the insurance stocks with a 3.5% climb. Admiral Group (LSE: ADM) and RSA Insurance Group (LSE: RSA) added about 1.5%, while Aviva (LSE: AV), Prudential (LS:E PRU) and Standard Life (LSE: SL) rose marginally and Old Mutual (LSE: OML) was flat.

Private equity group 3i (LSE: III) was down 1%.

Small Cap Movers

Other notable movers among the small caps included project management and outsourcing services company Norcon (AIM: NCON) with a 6% gain and Africa focused investment companies LonZim (AIM: LZM) and Lonrho (LSE: LONR), which climbed 8% and 4% respectively.

Large and Mid Cap News

Marketing communications group Aegis Group (LSE: AGS) is extending its reach in China through a deal with Chinese advertising-agency Charm Communications. Aegis acquired a 17.7% stake in the advertising company and will establish a joint venture to give Charm’s Chinese clients access to its international media network. The FTSE250 constituent expects the partnership to deliver strong growth in the People’s Republic of China.

Small Cap News

Vatukoula Gold Mines (AIM: VGM) said the exploration drilling programme at its flagship Vatukoula gold mine in Fiji identified multiple mineralized structures, producing grades of up to 6.57 g/t (grammes per tonne).

Hornby (LSE: HRN) said it expects to finish the financial year with sales and profits significantly ahead of last year. In a trading update the hobby group said its products have seen higher demand since its H1 results, in the period from 1 October 2009 to date. The company has also addressed the supply issues, Hornby said.

Business solutions specialist, Versatile Systems (TSX-V: VV; AIM: VVS) reported that revenue for the three months ended December 31, 2009 (Q2 2010) slipped to $11.259 million (Q2 2009: $12.327 million) while gross profits fell to $2.66 million, or 23.6% of sales compared to $3.03 million, or 24.7% of sales in Q2 2009.

Genetic research and development company FuturaGene (AIM: FGN) said it has entered into a licensing agreement with Chinese seed producer BioCentury Transgene Co to provide genes for development in cotton plants.

Staffing group Healthcare Locums (AIM: HCL) said that trading continues to be robust with consistent month-on-month revenue and profit growth throughout 2009. In a trading update for the 52 weeks ended 31 December 2009, the company said it expects to report results in line with expectations. Vice chairman Kate Bleasdale said the company has very strong organic growth and it can look forward to 2010 with confidence.

Port facilities and wastewater treatment specialist, the Nature Group (AIM: NGR) announced that its Gibraltar based subsidiary has signed two trans-shipment licences for the transportation and treatment of oil slops and wastewater. The respective deals with the Port of Malta and the Spanish port of Ceuta have the potential to significantly increase group revenue.

Environmental products and services group Straight plc (AIM: STT) reported an 11% increase in turnover for 2009, expecting pre-tax profits to be in line with expectations along with a stronger 2010 after orders in the final quarter of 2009 reached unprecedented levels.

SeaEnergy (AIM: SEA) has agreed to extend the terms of an existing £2 million short term facility, agreeing to repay £0.5 million and lender LC Capital Master Fund extending the repayment of the remaining £1.5 million until 24 October 2010 at an annual interest of 4%.

Spectrum Interactive (AIM: SIN) has acquired the assets of Ocean Wave Europe to deliver high speed wireless internet access to 40 coastal and inland marinas in the UK and Ireland.

Kenmare Resources (AIM: KMR) aims to double production at its Moma titanium project in Mozambique. Kenmare MD Michael Carvill told the Reuters news agency that the company is currently working towards expanding on the 700,000 tonnes of ilmenite expected to be produced from Moma this year.

Leni Gas & Oil (AIM: LGO) updated the market on its operations today, saying that its direct and indirect production for the month of December totalled 10,215 boe (barrels of oil equivalent), peaking at the level of 393 boepd (barrels of oil equivalent per day) and expecting higher levels of production in January.

Phosphorite mine developer Sunkar Resources (AIM: SKR) announced a JORC resource estimate covering 40% of the Chilisai license area in Kazakhstan. The estimate confirms that the area contains more than sufficient resources for 20 years of ore extraction at a rate of 10 million tonnes per annum. The company said that the JORC-estimate is sufficient to support its economic assessment of the project. Investors welcomed this latest development at Chilisai; Sunkar share climbed almost 10% this morning following the project update.

Disclosure: The author holds no positions in the company