Overview: the FTSE 100 was down 0.4%, erasing yesterday’s gains as the markets were cooling off following last week’s rally. Energy and mining stocks edged lower as oil and metal prices declined on a stronger US dollar and demand concerns. Other bearish factors included today’s US consumer confidence update from Investor’s Business Daily, which said that its Economic Optimism Index fell to its lowest in a year.
Insurer Old Mutual (LSE: OML) was atop the leaderboard with a 2% climb. Temporary power provider Aggreko (LSE: AGK) and pharmaceutical company GlaxoSmithKline (LSE: GSK) added slightly more than 1%. Car insurer Admiral Group (LSE: ADM) and specialty chemicals firm Johnson Matthey (LSE: JMAT) were up 1%.
Commercial property company Liberty International (LSE: LII), bank Standard Chartered (LSE: STAN), Imperial Tobacco Group (LSE: IMT) and Hammerson (LSE: HMSO) were in decline, shedding 4%, 3%, 2.5% and 2% respectively.
US stocks were off to a flat start as the Dow Jones Industrial Average and the broader S&P 500 index both posted marginal gains in early trade, while the technology heavy NASDAQ composite added 0.25%.
Tuesday marked the first anniversary of the beginning of the rebound in global stock markets following the 2008/09 meltdown.
Oil prices fell today ahead of key inventories reports amid a stronger US dollar and a downward movement in global equity markets.
Uncertainly over the demand outlook has also contributed as global equity markets were in selling mode today following last week’s rally that fuelled the crude’s surge that saw it eclipse US$82/barrel. The FTSE 100 declined 0.6% today, while the Dow Jones Industrial Average is projected to drop 0.2% in early trade.
April Brent Crude slipped to US$79/barrel on the ICE Exchange, while US light, sweet crude declined to US$80.50/barrel on the New York Mercantile Exchange (NYMEX).
The API (American petroleum Institute) is set to release its inventories data today ahead of a more closely watched inventories report from EIA (Energy Information Administration). A Reuters poll has predicted a sixth straight week of growth in oil stockpiles, signalling a lower level of demand.
Blue chip oil and gas producers showed little movement today. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) were flat, as was Cairn Energy (LSE: CNE), while another FTSE 100 constituent BG Group (LSE: BG) posted an insignificant loss. Tullow Oil (LSE: TLW) was down 1.6%.
Amec (LSE: AMEC) rose marginally, while fellow oil and gas engineering firm Petrofac (LSE: PFC) posted a small loss.
Midcaps were mixed. Dragon Oil (LSE: DGO) and Heritage Oil (LSE: HOIL) lost 1%, while peers Dana Petroleum (LSE: DNX) and Premier Oil (LSE: PMO) shed less than 1%. Soco International (LSE: SIA) was flat, while JKX Oil & Gas (LSE: JKX) and Salamander Energy (LSE: SMDR) rose marginally and Melrose Resources (LSE: MRS) was down 1.3%.
Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) led the small caps, advancing 7.5% after reporting on its full year results. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) followed with a 5% gain.
Europe focused oil and gas developer Ascent Resources (AIM: AST) slipped 7%.
Gold, silver and platinum decline on stronger US dollar
Gold prices declined sharply today as the US dollar gained against the euro, pushing down the yellow metal following last week’s rally that saw it climb to seven week highs, supported by a rally in global equity markets that increased investors’ appetite for riskier assets such as precious metals and an improved outlook for the Greek fiscal crisis following a successful bond issue and the introduction of a new economic austerity package.
Europe’s single currency, which has been under mounting pressure as Greece’s debt crisis unravelled, weakened today after the country’s Prime Minister George Papandreou asked US President Barack Obama to assist with fixing Greece’s economic problems by imposing stricter regulations on hedge funds and currency traders. Papandreou said that the situation could lead to another economic downturn and the consequences of a weaker euro would spread far beyond the euro zone, leading to a rising US trade deficit as a result of a weaker euro.
Papandreou and Obama are set to meet behind closed doors in Washington, DC today.
Last week, Greece introduced new measures to reduce the ballooning budget deficit including pay cuts for public servants and tax hikes, while conducting a successful bond issue to raise €5 million to meet its near-term commitments.
Chinese demand is also a concern after Director of the country’s State Administration of Foreign Exchange Yi Gang said its investment in gold will now be limited due to a “few factors,” including the inconsistency of the yellow metal’s price over the past 30 years that reduced its appeal as a long-term investment. China, which is the world’s largest producer and the second bigger consumer of gold behind only India, currently has US$2.4 trillion in foreign exchange reserves, including holdings of 1,054 tonnes of gold compared to holdings of 600 tonnes in 2003.
Gang concluded that gold will not be China’s primary investment focus, currently making for roughly 1.5% of its total foreign exchange reserves.
Gold fell to US$1,116/oz today, while silver and platinum dropped to US$17.04/oz and US$1,582/oz respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) was flat.
Midcaps followed. Silver producer Hochschild Mining (LSE: HOC) was at the bottom of the pile with a 3.5% loss. Gold miner Petropavlovsk (LSE: POG) and Aquarius Platinum (LSE: AQP) shed 2.5% and 2.2% respectively.
Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) led the juniors, climbing 8,5% and 7% respectively.
Philippines focused Metals Exploration (AIM: MTL) also did well, adding 4%.
Western Australia operating Norseman Gold (AIM: NGL) was down 4%.
Miners retreat as base metals fall
Base metals followed the trend with copper and nickel falling to US$3.35/lb and US$9.92/lb respectively, while zinc slipped to US$1.05/lb.
Base metal miners retreated. Kazakhmys (LSE: KAZ) lost 2%, while Anglo American (LSE: AAL) and Rio Tinto (LSE: RIO) declined 1.6%, BHP Billiton (LSE: BLT) lost 1.4% and Xstrata (LSE: XTA) slid 1%. Eurasian Natural Resources (LSE: ENRC) and Vedanta Resources (LSE: VED) shed nearly 1%, while Antofagasta (LSE: ANTO) declined marginally.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, posting a marginal loss.
Juniors didn’t show much movement today. Iron ore focused investor Red Rock Resources (AIM: RRR) was an exception with a 7% decline.
Banks, insurance, private equity
Financial stocks were in selling mode today. Standard Chartered (LSE: STAN) was at the bottom of the mining sector with a 3% loss, while Royal Bank of Scotland (LSE: RBS) and fellow part-nationalised bank Lloyds (LSE: LLOY) shed 2% and 1.3% respectively and HSBC (LSE: HSBA) lost 1%. Barclays (LSE: BARC) posted an insignificant loss.
Insurers were mixed. Old Mutual (LSE: OML) led the sector with a 1.6% gain, while Admiral Group (LSE: ADM) and Standard Life (LSE: SL) gained less than 1%.
Private equity group 3i (LSE: III) declined marginally.
Small Cap Movers
Other notable movers among the small caps included Africa focussed soft commodity specialist, Agriterra Limited (AIM: AGTA) and IP commercialisation company Amphion Innovations (AIM: AMP) with losses of 6.5% and 8% respectively and mobile email and data synchronisation group Synchronica PLC (AIM: SYNC), which rallied 11% after landing the biggest contract for its push email product Mobile Gateway.
Large and Mid Cap News
Gold Resource Corporation (OTC:GORO, ETR:GIH) confirmed this morning that Hochschild Mining (LON:HOC) has increased its holding to 28.7% after it subscribed for 600,000 shares in a private placement and acquired a further 440,500 shares in the market.
Waste manager Shanks Group (LSE: SKS) has ended its discussions with its private equity suitor, the Carlyle Group, saying the international private equity group’s final price indication of 120p per share does not properly reflect Shank’s value.
Small Cap News
Based on the results of 2009’s exploration season, Chaarat Gold (AIM: CGH) has increased the JORC compliant estimate tor the Chaarat project, by 670,000 ounces to 4.009m oz. The 2009 drilling results consisted of 25 new core drill holes totalling 5,357m and four cross-cuts totalling 307m, the drilling covered 11 project areas along a 6km strike length. The results were incorporated into the project’s resource database and SKR Consulting carried out the JORC-resource estimate.
Security technology specialist Westminster Group (AIM: WSG) repoerted an 89% increase in online enquiries and a 62% increase in online sales since it launched its new ‘Generation 2’ website in April 2009. According to Westminster, the website has achieved nearly a threefold increase in the average visitor number compared to the previous website, based on record unique visitor numbers in January 2010.
Discovery Metals (ASX/BSE: DML; AIM: DME) has awarded the Boseto copper concentrate sales contract to Transamine, a global nonferrous raw materials trading company.
UK based stem-cell biotech company, Epistem (LSE: EHP) revealed the commercial progress being made through its partnership with Novartis as it reported a 90% year-on-year increase in revenue during the six months ended 31 December 2009. Revenue in the first half saw rose to £2.8m compared with £1.5m in the same period a year earlier.
Landore Resources (AIM: LND) said drilling at the Junior Lake-Lamaune gold prospect in Ontario continued to intersect widespread gold mineralisation, including 0.6 metres at 118.66 g/t (grammes per tonne) gold, and announced staking additional claims for 9,472 ha (hectares) in the Keezhnik Lake area 20 km (kilometres) from its Miminiska Lake property.
In response to speculation in the Daily Mail, UK COAL (LSE: UKC) said it is "not aware of any proposal from the group's major shareholder or any other source". Whilst refuting the media reports, the company informed investors that it has received a very early stage merger proposal from an unnamed party.
Stratex International (AIM: STI) reported on the progress made in the full year 2009 today, which included three alliances to fast-track its four major projects in Turkey, new targets defined at the Oksut project and expansion into Ethiopia.
London Mining (AIM, OSX: LOND) has expanded its JORC-compliant resource at the Isua project in Greenland to an Indicated Resource of 114Mt (million tonnes) and Inferred Resource of 837Mt respectively, grading 37% and 36% Fe respectively.
Disclosure: The author holds no positions in the company