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Kazakhmys, Xstrata, ENRC, Rio Tinto and Anglo American lead retreat as FTSE 100 sheds 1.4%

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Overview: the FTSE 100 tumbled 1.4% on top of yesterday’s 1.3% loss. After starting the week above 5,300, the Footsie is now down to 5,100. The markets in Europe and the US switched back to selling mode today as miners declined despite new Australian PM Julia Gillard’s willingness to renegotiate the recently proposed mining super-tax and positive US jobless claims data, which showed a decline of 19,000 to 457,000.

Energy company Centrica (LON:CNA) emerged atop the leaderboard with a 3.2% gain. Supermarket chain Morrison’s (LON:MRW) advanced 3%. Mobile operator Vodafone (LON:VOD) climbed 1.8%, while retailer Tesco (LON:TSCO) and water company United Utilities (LON:UU) added 1.3% and 1.2% respectively. Security services company G4S (LON:GFS) was the only other FTSE 100 constituent to add more than 1%, posting a gain of 1.1%.

Miners were the biggest fallers of the day. Kazakhmys (LON:KAZ), Eurasian Natural Resources (LON:ENRC) and Fresnillo (LON:FRES) were at the bottom of the pile with losses of 4%, 3.6% and 3% respectively. Sector peers Xstrata (LON:XTA) and Lonmin (LON:LMI) also dropped 3%.

US stocks were off to a negative start. The Dow Jones Industrial Average slipped 1.1%, while the broader S&P 500 index and the technology heavy NASDAQ composite declined 1.4%.

Commodities

Oil inches lower as markets drop

Oil prices remained low today as stock markets in Europe and the US extended losses on the Fed’s bearish comments about the strength of the ongoing economic recovery. The Federal Open Markets Committee (FOMC) of the Federal Reserve, which yesterday once again left the current ultra-low interest rates unchanged, stated that current financial conditions had become “less supportive” of the economic growth due to “developments abroad,” apparently referring to the debt crisis that is currently ravaging Europe.

Up until now, the Fed repeated that the financial conditions were favourable for the ongoing recovery.

Investors got yet more bad news today when it was reported that new home sales plummeted 32.7% in May to an all time low of 300,000 annualised. The National Association of Realtors said on Wednesday that existing home sales dropped by 2.2% during the month.

August Brent Crude slid to US$75.98/barrel, while US light, sweet crude for August delivery declined to US$76.26/barrel.

Blue chip oil and gas producers were in decline today. Tullow Oil (LON:TLW) was at the bottom of the pile with a 2.7% loss. BG Group (LON:BG) and Cairn Energy (LON:CNE) lost 2.1% and 1.4% respectively.

BP (LON:BP) posted a small loss, while fellow supermajpr Shell (LON:RDSB) declined 1.8%.

Services companies Amec (LON:AMEC) and Petrofac (LON:PFC) both lost 1.4%.

Most midcaps were in the red. Dana Petroleum (LON:DNX) led the retreat, slipping 8% after drilling two uneconomic wells in Egypt. Salamander Energy (LON:SMDR) and Premier Oil (LON:PMO) moved down 3.7% and 3% respectively. Melrose Resources (LON:MRS) retreated 2% and Heritage Oil (LON:HOIL) dropped 1.6%. Soco International (LON:SIA) lost nearly 1%, while JKX Oil & Gas (LON:JKX) was flat.

Dragon Oil (LON:DGO) went against the tide, climbing 1.2%.

Energy investor Xtract Energy PLC (AIM: XTR) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) were the top performing small caps with gains of 10% and 7% respectively. Iraq operating Irish oil company Petrel Resources (AIM: PET) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) headed in the opposite direction, shedding 8% and 6.7% respectively.

Gold, silver and platinum decline

Despite another round of losses in global stock markets, gold has been in decline for two days, at one point plunging to US$1,225/oz. Today the yellow metal failed to recapture the US$1,240/oz mark it gave up yesterday and, after staying in the high $1,230s, slid to US$1,234/oz.

Following recent gains, which put gold at a new all time high of US$1,266/oz, investors have been selling the asset to reap profits, leading to declines in gold prices.

Other precious metals followed gold as silver and platinum retreating to US$18.31/oz and US$1,545/oz respectively.

Major mining stocks were in decline. Silver miner Fresnillo (LON:FRES) and platinum producer Lonmin (LON:LMI) lost nearly 3%, while gold miner Randgold Resources (LON:RRS) retreated 1.2%.

Specialty chemicals firm Johnson Matthey (LON:JMAT) posted a small lost.

Aquarius Platinum (LON:AQP) was the biggest faller among the midcaps with a 4.6% decline. Gold miner Petropavlovsk (LON:POG) and silver producer Hochschild Mining (LON:HOC) dropped 3.8% and 2.4% respectively.

Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) and Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) outperformed the market, surging 10% and 6% respectively.

Junior diamond miner Stellar Diamonds (LON:STEL) and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEFI) slipped 8% and 6% respectively.

Copper and nickel rise but miners tumble

Base metals were on the rise today. Copper and nickel improved to US$2.99/lb and US$8.85/lb respectively, while zinc climbed to US$0.82/lb.

However, all base metal focused miners posted losses. Kazakhmys (LON:KAZ) led the retreat, shedding 4%. Eurasian Natural Resources (LON:ENRC) dropped 3.3%. Xstrata (LON:XTA) and Rio Tinto (LON:RIO) lost about 2.5%. Anglo American (LON:AAL), Antofagasta (LON:ANTO) and Vedanta Resources (LON:VED) shed nearly 2%. The world’s largest miner BHP Billiton (LON:BLT) moved down 1%.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, posting a loss of 2.2%.

South Africa based coal exploration and production company Strategic Natural Resources (AIM: SNR) and South Africa operating chrome miner Chromex Mining (AIM: CHX) moved along with the majors, declining 13% and 10% respectively.

Iron ore focused investor Red Rock Resources (AIM: RRR) did better, adding 7.5%.

Banks, insurance, private equity

Barclays (LON:BARC) and Lloyds (LON:LLOY) were at the bottom of the banking sector with losses of over 2.5%. Standard Chartered (LON:STAN) declined 1.7%, while HSBC (LON:HSBA) and Royal Bank of Scotland (LON:RBS) moved down 1.4%.

Insurance companies were mixed. Admiral Group (LON:ADM) and RSA Insurance Group (LON:RSA) added less than 1%, while Prudential (LON:PRU) retreated 1.7%, Aviva (LON:AV) shed 1% and Old Mutual (LON:OML) lost less than 1%, as did Standard Life (LON:SL).

Private equity group 3i (LON:III) lost 1.4%.

Small Cap Movers

Other notable movers among the small caps included South Africa operating power producer IPSA Group (AIM: IPSA), which rallied 8.7%, as well as offshore marine renewables development company SeaEnergy (LON:SEA) and developer of advanced computer based imaging software systems Seeing Machines (LON:SEE) with losses of 8% and 23% respectively.

Small Cap News

Auzex Resources (ASX: AZX) has commenced a diamond drilling program at the Bullabulling Gold Project in Western Australia to intersect known mineralisation over a 2.5km portion of the Bullabulling Trend between the Bacchus and Phoenix pits.

Prosperity Minerals Holdings Ltd (LON:PMHL) announced an increase in the cap of the ‘Master Off-take Agreement’ to buy up to US$1bn of iron ore from Grace Wise - an associated company of its co-founder, CEO major indirect shareholder, David Wong.

Edison Investment Research issued a note on supplier of bead and drug eluting bead products Biocompatibles International (LON:BII), supporting the company’s revenue and growth projections in the wake of the positive results received so far from ongoing trials and distribution deals in key markets.

Irish zinc miner Connemara Mining (LON:CON) narrowed losses in 2009 significantly and noted the operational progress made during the year at the the Stonepark zinc discovery in Limerick which continued to grow in size and importance, with recent results showing an extension of a high grade mineralisation.

Solo Oil (LON:SOLO) confirmed that it is now a full party to the Ruvuma joint operating agreement over the Lindi and Mtwara blocks in Tanzania, alongside Tullow Oil (LON:TLW) and Aminex (LON:AEX). After the company exercised its option to take up a 12.5% interest in the Ruvuma PSA (production sharing agreement) in April, Solo has now has now completed all outstanding matters, relating to the option, with Tullow, Aminex and the Tanzanian government.

In its results for FY09, Petro Matad (LON:MATD) reported it has accomplished a great deal in an important year.  Financing and equipment are now in place to progress exploration activities in Mongolia, with drilling now underway on Block XX, and exploration work continuing on Blocks IV and V.

IP-centred media group Coolabi (LON:COO) said the classic children's series, Bagpuss, Clangers and Ivor the Engine are now available to download from iTunes. Coolabi manages and represent the licensing and distribution rights of Smallfilms, who own the intellectual property rights over the three classic children's television series.

The International Court of Arbitration has found in favour of Oilex (ASX:OEX, LON:OEX) subsidiary Oilex West Kampar Ltd in its claim against the operator, and  stakeholder, of the West Kampar PSC joint venture, for the recovery of US$4.6m owed to Oilex. The West Kampar PSC is located in Central Sumatra, Indonesia.

Nyota Minerals (LON, ASX:NYO) said deputy chairman David Pettman has bought 100,000 Nyota ordinary shares and he now holds 320,000 Nyota shares and 2 million options exercisable at A$0.15.

Red Rock Resources (LON:RRR) has reported new results from prospecting at the Macalder gossan, hosted on the 68 km Migori greenstone belt in South West Kenya, with 35 grab samples indicating the presence of significant grades of easily recoverable gold. The samples were taken from artisanal underground workings, and the highest grade sample contained 35.8g/t gold.

Frontier Mining (LON:FML) has begun the construction of the open pit mine at its Benkala copper project in Kazakhstan. The company is permitted to remove a total of 3 million cubic metres in 2010, and the initial stripping operations are now underway. Frontier is targeting initial production in the first half of 2011.

Large and Mid Cap News

Construction and infrastructure group Carillion PLC (LON:CLLN) said it was awarded a £306 million Public Private Partnership project design, build, finance and maintain Toronto's Forensic Services and Coroner's Complex (FSCC).

Pennon Group PLC (LON:PNN) said  its subsidiary Viridor Waste Management Ltd has acquired Reconomy Recycling Solutions Ltd (Reconomy), a UK materials recycling company, for a cash consideration of £23.8 million on a debt free basis. The acquisition is in line with the group's strategy of expanding its waste management activities, particularly in the recycling sector.

Commercial property company Segro (LON:SGRO) said that following changes to the SIIC (French REIT) regime, which means that it is no longer a regulatory requirement to have a listing on a domestic stock exchange, the company has, due in part to the low volume of transactions in Paris, elected to apply for the delisting of its shares from NYSE Euronext.

FTSE 250 oil and gas producer Dana Petroleum (LON:DNX) said its “challenging” Bamboo well in Egypt and the Monkwell well in the UK’s southern North Sea were not economic, which more than offset the announcement of two new discoveries in Egypt, sending the shares down by more than 7% in late morning trade.

Oil and gas services company and FTSE 100 constituent Petrofac (LON:PFC) said its performance was in line with expectations, projecting its backlog to amount to US$6.9 billion at 30 June 2010 compared to US$8.1 billion at the end of 2009.

The Allied Defense Group (AMEX: ADG) said it has signed a definitive purchase agreement with Chemring Group PLC (LON: CHG) under which the latter will acquire substantially all of the assets of ADG for US$59.6 million in cash and the assumption of certain liabilities. Chemring had announced to merge with ADG in January 2010 paying the same amount, having signed a conditional agreement with the US group to that effect.

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