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FTSE 100 declines as Dow Jones and S&P 500 open lower

Published: 11:05 23 Sep 2010 EDT

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Overview: the FTSE trimmed losses to 0.5% in late afternoon after shedding more than 1% earlier in the day after US jobless claims and EU manufacturing data came in weaker than expected.

Oil and gas engineering firm Petrofac (LON:PFC) and asset management firm Schroders (LON:SDR) rose 1.3% and 1% respectively. No other FTSE 100 constituent added 1% or more.

Engineering company Weir Group (LON:WEIR) was at the bottom of the pile with a 3.2% loss. Copper miner Kazakhmys (LON:KAZ) declined 3%. Retailer Kingfisher (LON:KGF) and another base metal miner Antofagasta (LON:ANTO) dropped 2.5%.

US stocks started the day in the red. The Dow Jones Industrial Average slid 0.15% and the broader S&P 500 index declined 0.2%. The technology heavy NASDAQ composite rose 0.3%.

Commodities

Oil prices declined today, feeling pressure from rising US stockpiles and falling stocks on both sides of the Atlantic.

After an inventories report from the American Petroleum Institute (API) showed a surprising gain of 2.2 million barrels in US crude oil stockpiles, the US Energy Department said that US inventories added 1 million barrels, reflecting a lower level of demand in the world’s largest energy consumer.

Equities were weighed down by today’s data on euro zone manufacturing PMI (purchasing managers index), which dropped from 55.1 to 53.6 in September.

In addition to that, initial jobless claims in the US unexpectedly increased by 12,000 to 465,000 after sliding for four straight weeks, which also did little to strengthen investor confidence.

Oil futures usually track movements in share prices, which serve as an indicator of the strength of the economy, impacting the outlook for energy demand.

In other news, US existing home sales climbed to an annualised rate of 4.1 million in August.

November Brent Crude declined to US$76.87/barrel, while US light, sweet crude for November delivery slid to US$73.86/barrel.

Supermajors BP (LON:BP) and Shell (LON:RDSB) posted small losses, as did Cairn Energy (LON:CNE), while Tullow Oil (LON:TLW) declined 1%.

Another FTSE 100 oil and gas producer, BG Group (LON:BG), stood just above the opening level.

Oil and gas engineering firms did better with Amec (LON:AMEC) and Petrofac (LON:PFC) gaining about 1%.

Midcaps were mixed. Dana Petroleum (LON:DNX) and Soco International (LON:SIA) added less than 1%, while Heritage Oil (LON:HOIL) advanced 1.2% and Melrose Resources (LON:MRS) and Salamander Energy (LON:SMDR) climbed 2% and 2.5% respectively.

Dragon Oil (LON:DGO) and JKX Oil & Gas (LON:JKX) declined marginally and Premier Oil (LON:PMO) lost 1%.

Services companies moved in opposite directions with Wood Group (LON:WG) rising 1.5%, while Wellstream Holdings (LON:WSM) retreated 1%.

East and Central Africa focused oil and gas explorer Dominion Petroleum (LON:DME) and Mongolia operating Petro Matad (LON:MATD) were among the top performing small caps with gains of 6% and 5% respectively.

Gold retreats to $1,290

Gold advanced after slipping below US$1,290/oz after equities in Europe and the US headed south on weak EU manufacturing and US employment updates.

Gold, which is seen as the main safe haven asset, has soared over the past two weeks, constantly posting new all time highs. However, the concerns about the pace of the economic recovery that have dominated the mood in the markets during this month as well as inflation fears have failed to provide enough support for the yellow metal to hold at US$1,300/oz.

Gold fluctuated around US$1,290/oz today, while silver and platinum slid to US$21/oz and US$1,631/oz respectively.

Gold producer Randgold Resources (LON:RRS) managed to post a small gain, while other blue chip miners slipped into the red. Peer African Barrick Gold (LON:ABG) and Platinum miner Lonmin (LON:LMI) shed less than 1%, while silver miner Fresnillo (LON:FRES) declined 1.1%.

Specialty chemicals firm Johnson Matthey (LON:JMAT) was sitting just below the opening level.

Aquarius Platinum (LON:AQP) posted a small gain, while silver producer Hochschild Mining (LON:HOC) dropped 2.1%. Gold miner Petropavlovsk (LON:POG) declined marginally.

Solomon Islands and Australia operating miner Solomon Gold (LON:SOLG) emerged as the biggest riser on the London Stock Exchange, soaring 200% after reporting more results from its Fauro Island gold project in the Solomon Islands.

Gemstone company focused on Zambian emeralds, Gemfields Resources (LON:GEM) and Africa focused gold and iron ore miner African Aura Mining (LON:AAAM) performed strongly, rising 8.5% and 6.5% respectively.

Gold and high value base metals focused exploration and development company Stratex International (LON:STI) climbed 5%.

Base metal miners decline

Copper declined to 3.54/lb, while other base metals climbed with nickel and zinc reaching US$10.20/lb and US$0.992/lb respectively.

Base metal miners were in decline today. Kazakhmys (LON:KAZ) led the retreat, falling 3.2%. Anglo American (LON:AAL) and Antofagasta (LON:ANTO) lost about 2.5%. Xstrata (LON:XTA) declined 2% and BHP Billiton (LON:BLT) moved down 1.5%, as did Rio Tinto (LON:RIO). Vedanta Resources (LON:VED) and Eurasian Natural Resources (LON:ENRC) each lost 1%.

Canada focused explorer and developer Landore Resources (LON:LND) led the juniors with a 23% rally. Tungsten, molybdenum and gold miner Thor Mining (LON:THR) surged 19%, Churchill Mining (LON:CHL), which is focused on its East Kutai thermal coal project in Indonesia, advanced 15% and mineral exploration company Red Rock Resources (LON:RRR) climbed 10%.

Developer of chromite mining and processing facilities Chromex Mining (LON:CHX) and southern Africa focused miner Strategic Natural Resources (LON:SNRP) joined the party, rising 6.5% and 5% respectively.

Banks, insurance, private equity

Financial stocks were in decline today. Lloyds (LON:LLOY) and Standard Chartered (LON:STAN) declined 2%, while HSBC (LON:HSBA) dropped 1%.

Other major banks, Royal Bank of Scotland (LON:RBS) and Barclays (LON:BARC), declined marginally.

Prudential (LON:PRU) was at the bottom of the insurance sector with a 1.3% loss. Admiral Group (LON:ADM) and RSA Insurance Group (LON:RSA) pulled back 1%, while Aviva (LON:AV), Old Mutual (LON:OML) and Standard Life (LON:SL) declined marginally.

Legal & General (LON:LGEN) bucked the trend, posting a small gain.

Private equity group 3i (LON:III) lost 1%.

Small Cap News

Western Australia based ADX Energy (ASX: ADX) initial evaluations of the Lambouka-1 well in Tunisia has identified a mean recoverable gas resource estimated to be 309 billion cubic feet, with the potential for significant associated condensate volumes.

Home credit specialist S&U (LON:SUS) reported an 8 per cent rise in first-half earnings, driven by a stellar performance from the motor finance operations. Pretax profits advanced £400,000 to £5.4 million in the six months to July 31 on revenues that were up 7 per cent at £23.6 million.

Ascent Resources (LON:AST) has added a fourth project in Hungary, having agreed a deal with Winstar Resources (TSX:WIX) to acquire an interest in a 1,990km2 exploration permit. The Igal-II exploration permit is situated to the south east of Lake Balaton, in Central Hungary.

Plant Impact (LON:PIM) has extended the coverage of its crop nutrient products from 52 to 73 countries with an exclusive evaluation, development and distribution agreement with Agrimatco. The agreement covers countries in the Middle East, North Africa, Eastern Europe and Central Asia.

Asterand (LON:ATD) chief executive Martyn Coombs said he is delighted with the performance of its BioSeek subsidiary since his company acquired and successfully integrated the business earlier this year.

Thor Mining (LON:THR, ASX:THR) emerged among the leading risers in the mining sector today after reporting on its activities during the financial year to end-June 2010, highlighting the very promising results yielded by early stage exploration activities at its Dundas gold project in Australia.

African Eagle (LON:AFE)chairman Euan Worthington is confident that the Dutwa project has taken a further step to becoming a world class nickel mine, after increasing its resource by almost 150% in the first half. On London’s AIM market the company’s stock was fairly buoyant, rising just over 8%.

Biocompatibles International (LON:BII) has commenced the treatment of Type 2 diabetes patients in the third of four studies in the CM3 Product Development Programme partnered with FTSE 100 pharmaceutical company AstraZeneca (LON:AZN).

Green Dragon Gas (LON:GDG) has raised US$50m via a convertible bond issue to a Canadian professional pension plan to drill CBM (Coal Bed Methane) gas wells and build infrastructure in China.

Despite the “adverse global economic climate”, Westminster Group (LON:WSG) continued making progress in H1, which included major deals with the UK Ministry of Justice and World Health Organization. The company noted that it remained not dependent on any one supplier market or region, providing a broad range of niche products and services to niche markets around the world.

Edison Investment Research noted this week’s full year results from Goldplat (LON:GDP), saying that operating profit, profit before tax and earnings per share were all close to its estimates. Goldplat reported a 14% increase in normalised pre-tax profits with increased margins offsetting declines in revenues.

Chaarat Gold (LON:CGH) has raised £2.9 million to commission a feasibility study and accelerate the development of the Tulkubash project in the Kyrgz Republic. The company’s broker Westhouse Securities arranged the placing of 6.8 million new shares, priced at 42 pence each.

Natural resource royalty company Anglo Pacific Group (LON:APF, TSX:APY) has agreed to purchase, from Australia-based Beadell Resources (ASX:BDR), the 1.0% gross iron ore revenue royalty rights covering the Anglo American-operated Amapa Iron Ore System in northern Brazil, as well as Beadell's mining concessions and exploration tenements in the Amapa region, for A$31.25 million in cash.

Red Rock Resources (LON:RRR) could be worth over 20p per share, according to Edison Investment Research analyst Charles Gibson. In a note entitled ‘Cranking Up’, Edison reflected on the diversified resource company’s "eventful summer".

The eagerly anticipated feasibility study on Churchill Mining’s (LON:CHL) East Kutai Project in Indonesia has confirmed it is a world class coal deposit. The news propelled shares in the group 15 per cent higher in early deals on the London Sock Exchange, to trade at 142 pence.

Anthony Coombs, the chairman of S&U LON:SUS), said the group remains interested in Shopacheck, a rival home credit company owned by Cattles PLC (LON:CTT), and reported solid interim results.

Trading in Solomon Gold (LON:SOLG) reached fever pitch on London’s AIM market after the group revealed its Fauro Island Project has the potential to be a world class deposit. The shares burst into life this afternoon with a four-fold increase to hit a staggering 81p intraday-high, before settling at around 50p each.

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