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FTSE 100 clears 4,800 in midmorning trade, oil stocks and miners still strong

Published: 07:43 21 Aug 2009 EDT

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Overview: UK markets initially opened lower, hit by a weak performance overnight in Asia. However, stocks bounced back once again, driven by Legal & General (LSE: LGEN), for the second day running, fuelled by rumours it could be Resolution’s next acquisition target. The insurer was up 4.5% at midday, also lifting peers Old Mutual (LSE: OML), Prudential (LSE: PRU) and Aviva (LSE: AV).

British Airways also helped with a 4.8% gain. The airline said earlier its ad agency would slash its UK headcount by 10%.

SABMiller (LSE: SAB) followed with a 3.5% climb, while fellow beverage company Diageo (LSE: DGE) recovered from Thursday’s slump with a 2% advance.

Key movers: in the red

The fallers were led by advertiser WPP Group (LSE: WPP) slid over 2% after saying it would merge the US print buying departments of its three media agencies.

Property company British Land Co (LSE: BLND), which is currently trying to sell its Broadgate property in London to Blackpool, is still cooling off from last week’s hike on rumours it could be taken over by a consortium led by Lakshmi Mittal. British Land once again showed up on the top faller list with a 1.5% retreat.

The mining sector, which otherwise did well in early trade, was hit by gold miner Randgold Resources (LSE: RRS), which retreated 2%.

With the exception of software developer Sage Group (LSE: SGE) no other FTSE 100 constituent suffered losses of over 1% in midmorning trade.

Oil and gas sector keeps climbing as oil solidifies gains

Oil shares were steady despite a slight pull back in crude prices. US light crude remained at around US$72.5/barrel, while Brent Crude retreated slightly just below US$73/barrel.

The oil and gas sector was predominantly in the positive, but key stocks did not show much movement.

Supermajor BP (LSE: BP), which said it would build a bitumen facility in Australia, and peer Shell (LSE: RDSB) were up 1% and 1.5% respectively, while BG Group (LSE: BG) tacked on 1%.
With the exception of Dragon Oil (LSE: HOIL), which opened with small losses, midcaps fell into the same pattern. Cairn Energy (LSE: CNE) and Dana Petroleum (LSE: DNX) both climbed 1.4%, while Heritage Oil (LSE: HOIL) added 1%. Tullow Oil (LSE: TLW) rose marginally.

There were a few notable risers among the juniors this morning.

Latin American focused junior Gold Oil (AIM: GOO), which did not release any news or updates today, jumped 31%.

Iraq operating Irish oil company Petrel Resources (AIM: PET) and Europe focused oil and gas developer Ascent Resources (AIM: AST) also impressed, hiking 13% and 8% respectively.

Canadian focused oil and gas group Enegi Oil (AIM: ENEG) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) followed with gains of 5.6% and 3.5% respectively.

However, Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) slipped 4% on profit taking.

Precious metal miners gain on steady prices

There was little movement in metal prices this morning. Gold fluctuated around US$941/ounce. Silver held steady at US$13.92/ounce, while Platinum declined slightly, slipping to US$1,231/ounce.

Platinum miners were once again in the lead, while silver and gold producers were mixed.

Aquarius Platinum (LSE: AQP) and Lonmin (LSE: LMI) climbed 1.8% and 1.4% respectively. Specialty platinum catalyst firm Johnson Matthey (LSE: JMAT) added less than 1%.

FTSE 100 silver miner Fresnillo (LSE: FRES) rose just below 1%, while mid tier silver producer Hochschild Mining (LSE: HOC) opened in the negative.

Gold producers headed in different directions. Randgold Resources (LSE: RRS) dropped over 2%, but Peter Hambro Mining (LSE: POG) held on and stayed in the black in midmorning trade.

Juniors also were mixed, but showed more volatility.

Kazakhstan operating gold miner Frontier Mining (AIM: FML) was in the lead with a 17% gain.

Solomon Gold (AIM: SOLG) was strong, climbing over 6%. Turkey focused gold miner Stratex International (AIM: STI) rose 3.9%, while Western Australia operating Norseman Gold (AIM: NGL) rallied almost 5%. Metals Exploration (AIM: MTL), which is developing a large gold-molybdenum project in the Philippines, added 3.1% on top of yesterday’s strong performance.

However, Uzbekistan focused gold miner Oxus Gold (AIM: OXS) disappointed with a 6.8% decline.

Diamonds juniors also did well. West African Diamonds (AIM: WAD) was strong with a 7% gain and Lesotho operating Kopane Diamond Developments (AIM: KDD) was up 3.7%.

Base metal miners follow

Just like precious metals, base metals remained around yesterday’s levels. Copper added just two cents, rising to US$2.76/pound, while Nickel improved to US$8.68/pound. Zinc was unmoved at US$0.80/pound.

Major base metal miners all remained above the opening levels, but didn’t move by much.

Indian miner Vedanta Resources (LSE: VED) outperformed its peers with a 2% improvement. Xstrata (LSE: XTA), Rio Tinto (RIO) and Anglo American (LSE: AAL) followed with gains of over 1.5%.

Copper miners Kazakhmys (LSE: KAZ) and Antofagasta (LSE: ANTO) both added less than 1%.

The world’s largest miner BHP Billiton (LSE: BLT) rose marginally.

Junior miners, however, put up a much stronger performance.

Diversified mining junior Regency Mines (AIM: RGM) was among the top performers in the market on Friday, swelling 96%. Tunisia focused metal miner Maghreb Minerals (AIM: MMS) and iron ore focused investor Red Rock Resources (AIM: RRR) both added 22% in midmorning trade.

Shares in Indonesia operating coal miner Churchill Mining (AIM: CHL) were also a hot item in the market this morning, surging 12%. Tantalum concentrate supplier with assets in Mozambique Noventa (AIM: NVTA) advanced 5.7%.

Zinc mining and recycling specialist ZincOX (AIM: ZOX) and Russian focused Amur Minerals (AIM: AMC), which experienced a dramatic rise yesterday after updating its nickel resource estimates, were in for a correction, shedding 7% and 4% respectively.

Banks, insurance, private equity

Most financial stocks were in the positive in the morning.

Barclays (LSE: BARC) was the lone faller with a marginal decline.

Royal Bank of Scotland (LSE: RBS) led the major banking groups, rising 1.6%. HSBC (LSE: HSBA) was flat, while Lloyds (LSE: LLOY) and Standard Chartered (LSE: STAN) were up 1% each.

Insurers outperformed the banking sector in early trade. Yesterday’s leader Legal & General (LSE: LGEN) again outperformed the insurers, rising 4.5%, still getting a boost from speculation of a possible takeover by Resolution.

Aviva (LSE: AV) almost caught up with Legal & General, rallying 3%.

Other insurance stocks rose in sympathy. Prudential (LSE: PRU) and Old Mutual (LSE: OML) both climbed over 2%.

Standard Life (LSE: SL) rose 1.6%.

Other Small Cap Movers

Interactive gaming group Netplay TV PLC (AIM: NPT) rallied 8.4%. Computer-Aided Detection (CAD) and image analysis software specialist, Medicsight (AIM: MDST) climbed on a second straight day, adding a further 4.5%

Large and Mid Cap News

FTSE 250 constituent Stobart PLC (LSE: STOB) said this morning that it was still confident of hitting market expectations for the full year in a trading statement this morning, thanks to strong demand for its multimodal transport and logistics services.

Property search website and FTSE 250 constituent Rightmove plc (LSE: RMV) reported lower revenues and profits in H1, but said the business has returned to growth as traffic and spend per client increased, projecting the positive trends to continue into the second half and 2010.

Small Cap News

Engineering and construction group Kentz Corporation (LSE: KNZ) announced that it had secured a A$150 million contract win related to the massive Gorgon Project in Western Australia. The Gorgon Project is a 40 trillion cubic feet (tcf) gas field that is being developed by Chevron, ExxonMobil and Shell.  The field is located between 130 kilometres and 200 kilometres off the north-west coast of Western Australia, and is the largest gas resource in the country.

Grandtop International, an investment company controlled by Hong Kong businessman Carson Yeung, launched a 100 pence per share takeover offer for Birmingham City Football Club (LSE: BMC) this morning.  Shares in the Premiership side soared more than 40% on the news.

London-based Leni Gas & Oil (AIM: LGO) is set to secure a 20% interest in partly owned Byron Energy’s operations in the Gulf of Mexico, which just expanded with four more leases. The Mineral Management Services has confirmed Byron Energy as the highest bidder for South Addition Blocks 469, 472, 473 and 475 on West Cameron Area of the Gulf of Mexico. Byron Energy is expected to secure a 100% working interest in these four leases within the next four months upon the completion of a geological review by the MMS.

Eastern European property developer, Nanette Real Estate Group (AIM: NAT) fell sharply after the company said it would be seeking shareholder approval to delist the company from AIM. As per usual, the company blamed the low valuation of the company and high cost of maintaining a listing combined with low liquidity as the reasons for delisting.

London Mining plc (OSX: LOND) and African Minerals Ltd (AIM: AMI) said the almost year long dispute over the Marampa area is over as the two companies have agreed to the boundaries of their respective areas.

Platinum Australia (ASX: PLA, AIM: PLAA) has signed a Committed Letter of Offer for a Bridge Facility of A$15M with Macquarie Bank Limited (MBL) for the purpose of retiring its finance and hedging facilities provided by Standard Bank of South Africa Limited (the Standard Bank Facility). Funds raised through the Facility will be utilized to immediately complete the repayment of the Standard Bank Facility for the development of the Smokey Hills Project.

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