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FTSE 100 rallies 2.3% as HSBC H1 profits double

Overview: the FTSE 100 rallied 2.35% today on optimism about the reporting week in the banking sector after HSBC (LON:HSBA) beat expectations with its interim report, revealing a twofold jump in H1 profits to £7 billion. Investors got more good news when the Commerce Department said that construction spending unexpectedly increased in June. US manufacturing PMI (purchasing managers index) declined from 26.2 to 55.5, however analysts expected a steeper fall.

Anglo-Swiss miner Xstrata (LON:XTA) and quality and safety services provider Intertek (LON:ITRK) led the blue chips with gains of 6%. Oil and gas engineering firm Petrofac (LON:PFC) added 5.5%, as did oil and gas producer Tullow Oil (LON:TLW). Other notable risers included Essar Energy (LON:ESSR) and airline British Airways (LON:BAY) climbed 4.5%.

Gold miner Randgold Resources (LON:RRS) was the only FTSE 100 constituent to lose more than 1%, shedding 1.3%.

US stocks rallied in early trade. The Dow Jones Industrial Average advanced 1.7%, while the broader S&P 500 index and the technology heavy NASDAQ composite surged 1.85% and 1.75% respectively.

Commodities

Crude futures reclaimed the US$79/barrel level today, moving close to US$80/barrel, powered by a rally in global equity markets and concerns over the August hurricane season that could disrupt oil production in the Gulf of Mexico.

September Brent Crude rose to US$79.29/barrel, while US light, sweet crude for September delivery improved to US$79.91/barrel on New York Mercantile Exchange (NYMEX).

Blue chip oil and gas producers were in demand today. Supermajors BP (LON:BP) and Shell (LON:RDSB) climbed 1.8% and 3.4% respectively. BG Group (LON:BG), Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW) advanced 2.3%, 2.7% and 4.5% respectively.

Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) added 2.5% and 3.6%.

Midcaps also did well with the sole exception of JKX Oil & Gas (LON:JKX), which posted a small loss. Dana Petroleum (LON:DNX) and Melrose Resources (LON:MRS) gained less than 1%. Dragon Oil (LON:DGO) and Premier Oil (LON:PMO) added 2.3% and 2.2% respectively, while Soco International (LON:SIA) climbed 4.4% and Salamander Energy (LON:SMDR) took the lead with a 5.6% advance.

Services companies followed with Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) tacking on 5.8% and 5.1% respectively.

Western Europe operating oil and gas company Northern Petroleum (LON:NOP) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) led the juniors with gains of 8%. US focused oil and gas junior Caza Oil & Gas (LON:CAZA) and Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LON:GOO) rallied 7.5% and 7%.

Energy investor Xtract Energy PLC (LON:XTR) headed in the opposite direction, slipping 9.5%. Mongolia-focused Petro Matad Ltd (LON:MATD) followed, shedding 5%.

Gold rises to $1,185

Gold rallied today, climbing close to US$1,190/oz despite today’s surge in the market. Precious metals were boosted by a slightly stronger safe haven demand and increased physical buying due to recent sharp falls in the price.

Gold last traded at US$1,186/oz. Silver and platinum improved to US$18.38/oz and US$1,587/oz respectively.

Major mining stocks were on the rise today.

Platinum miner Lonmin (LON:LMI) led the sector in the FTSE 100 with a 4.2% gain. silver miner Fresnillo (LON:FRES) followed, advancing 3%, while gold miner Randgold Resources (LON:RRS) went against the tide, sliding 1%. African Barrick Gold (LON:ABG) stood just above the opening level.

Specialty chemicals firm Johnson Matthey (LON:JMAT) also posted a 3% gain.

Midcaps did even better with Aquarius Platinum (LON:AQP) and silver producer Hochschild Mining (LON:HOC) rallying 5%. Gold miner Petropavlovsk (LON:POG) added 3%.

Turkey focused gold miner Ariana Resources (LON:AAU) and Africa operating gold miner GMA Resources (LON:GMA) took the lead in the sector with each surging 22%. South American based explorer Mariana Resources (LON: MARL) and Uzbekistan focused gold miner Oxus Gold (LON:OXS) followed with gains of 7.5% and 6%.

Junior diamond miner Stellar Diamonds (LON:STEL) was in the red with a 10% loss. Gemstone producer Gemfields (LON:GEM) and Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (LON:CGH) lost more than 5%.

Copper and nickel climb to lift miners

Base metals were on the rise today. Copper and nickel moved up to US$3.35/lb and US$9.81/lb, while zinc reached US$0.91/lb.

Major mining stocks posted good gains today.

Eurasian Natural Resources (LON:ENRC) was up 3.3%, while Anglo American (LON:AAL), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) added nearly 4%. Antofagasta (LON:ANTO) rose 4%. Kazakhmys (LON:KAZ) and Vedanta Resources (LON:VED) tacked on more than 4.5%. Xstrata (LON:XTA) rallied 6%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LON:FXPO) managed to outperform the sector, surging 6.4%.

Russia focused copper and nickel miner Amur Minerals (LON:AMC), iron ore focused investor Red Rock Resources (LON:RRR) and specialty minerals exploration and development company Thor Mining (LON:THR) led the juniors with gains of over 6%.

Banks, insurance private equity

Boosted by a strong interim report, HSBC (LON:HSBA) rallied 5% to emerge as the top performer in the banking sector. Part-nationalized banks Lloyds (LON:LLOY) and Royal Bank of Scotland (LON:RBS) climbed 4%. Barclays (LON:BARC) added 3% and Standard Chartered (LON:STAN) moved up 1%.

Admiral Group (LON:ADM) and Aviva (LON:AV) were the top performing insurance companies today with gains of over 4%. Old Mutual (LON:OML) and Standard Life (LON:SL) added 3.5% and 3%, while Legal & General (LON:LGEN), Prudential (LON:PRU) and RSA Insurance Group (LON:RSA) tacked on nearly 2%.

Private equity group 3i (LON:III) was little moved.

Small Cap Movers

Other notable movers among the small caps included developer of CAD and image analysis software Medicsight (LON:MDST) with a 6.5% gain.

Small Cap News

Mission Capital PLC (LON:MCAP) said it is  currently in preliminary discussions relating to an acquisition which would constitute a reverse takeover under AIM rules.

Turkey focused gold miner Ariana Resources (LON:AAU) said the latest drilling results from the Banu and Derya veins at its Red Rabbit project in Turkey “confirmed the integrity” of the resource at the Kiziltepe prospect with mineralised quartz intersected in every hole for a flawless “hit-rate”.

AVIA Health Informatics (LON:AVIA) will make a profit of around £250,000 in the coming year, according to forecasts compiled by the company’s broker Merchant Securities.

Herencia Resources (LON:HER) this morning said its latest drilling programme had uncovered a high grade extension to the Cathedral vein at its Paguanta zinc-silver-lead project in northern Chile.

Connemara Mining’s (LON:CON) latest drilling update on the Stonepark project in Limerick reveals it may be part of a ‘world-class’ zinc find, according to research carried out by Optiva Securities.

West Africa focused uranium explorer Forte Energy (LON:FTE. ASX:FTE) updated on its activities in the past quarter, which saw the completion of the maiden JORC resource estimate for its flagship Bir En Nar uranium project in Mauritania, which could soon see a substantial increase.

Range Resources Ltd (ASX:RRS; LON:RRL) reported on the progress made in the fourth quarter to end-June2010 and subsequently, noting that its joint venture partner in Somalia’s Puntland province, Africa Oil Corp, announced the farm-out of a 10 percent interest in the JV to ASX listed entity, Red Emperor Resources (ASX:AMP) during the period.

Serica Energy (TSX-V:SQZ, LON:SQZ) said that that on July 30, drilling operations commenced at the Oates exploration well location in Block 22/19c in the UK Central North Sea.

South American based explorer Mariana Resources (LON:MARL) has signed a drilling contract with Argentine company Eco Minera covering a minimum 10,000 metres at its Las Calandrias gold-silver project in the Santa Cruz province. The drilling programme is expected to take four months, starting in early September 2010, with an aim to produce a maiden resource estimate at the Calandria Sur target.

Large and Mid Cap News

WS Atkins PLC (LON:ATK) said it has it has entered into a definitive merger agreement to acquire The PBSJ Corp for US$280 million in cash, unanimously recommended by the boards of Atkins and PBSJ.

Hammerson (LON:HMSO), the shopping centre and office developer, reported a modest uptick in  the value of its property portfolio as it said the outlook for the remainder of the year was "uncertain".

The new co-owners of the Broadgate office complex in the heart of the City have this morning unveiled their first major development project. British Land (LON:BLND) and its private equity partner Blackstone are about to pull the trigger on a £340 million bespoke trading floor and offices for UBS.