Overview: the FTSE 100 declined 0.25% today after commodity prices pulled back to weigh on the oil and gas and mining sectors. The losses were limited by today’s visible trade update, which showed a decline in trade deficit from £81. Billion in February to £6.2 billion in February after exports jumped 9.5%.
Retailer Kingfisher (LSE: KGF) led the blue chips with a 3% gain. Hedge fund manager Man Group (LSE: EMG) and insurer Legal & General (LSE: LGEN) followed, climbing 2.7% and 2% respectively. Beverage group Diageo (LSE: DGE) added nearly 2%, while defence and aerospace systems manufacturer BAE Systems (LSE: BA), retailer Tesco (LSE: TSCO), hospitality company Whitbread (LSE: WTB) and interdealer broker ICAP (LSE: IAP) followed with gains of just over 1%. Retailers Next (LSE: NXT) and Marks & Spencer (LSE: MKS) added 1%.
Miners Antofagasta (LSE: ANTO) and Lonmin (LSE: LMI) were at the bottom of the pile with losses of over 2%. Temporary power provider Aggreko (LSE: AGK) also lost slightly more than 2%. Other base metal miners Vedanta Resources (LSE: VED) and Kazakhmys (LSE: KAZ) declined 1.7%.
US stocks inched lower in early trade. The Dow Jones Industrial Average and the technology heavy NASDAQ composite declined 0.15%, the broader S&P 500 index dropped 0.3%.
Commodities
Crude slips below $84 ahead of inventories data
Oil extended losses today with US benchmark crude slipping below US$84/barrel as the weak fundamentals reported last week continued catching up with the prices.
Oil has recently rallied to nearly US$87/barrel, though it has been in decline since the middle of last week after both the American Petroleum Institute (API) and Energy Information Administration (EIA) said that US oil inventories increased again last week, signalling lower demand despite buoyant equity markets and positive economic data released in the US.
EIA said that crude stockpiles increase by 2 mmbbls (million barrels) in the previous week, while the API said that US inventories added 1.1 mmbbls.
This week’s reports from the API and EIA are due today and on Wednesday respectively.
Meanwhile, the International Energy Agency (IEA) has said that rising energy prices coupled with a tight credit market could hamper the economic recovery in OECD (Organisation for Economic Cooperation and Development) countries, while acknowledging that the outlook for oil supplies has gotten better. IEA also said that concerns that oil market is overheated remain, as does the possibility of a quick reversal in the upward trend that was evidenced in March and early this month.
May Brent Crude slid to US$84.66/barrel, while US light, sweet crude fell to US$83.54/barrel on the New York Mercantile Exchange (NYMEX).
Blue chip oil and gas stocks didn’t show much movement today with most companies posting small losses. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) were flat, as was Tullow Oil (LSE: TLW). BG Group (LSE: BG) and Cairn Energy (LSE: CNE) declined 1.2% and 1% respectively.
Oil and gas engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) shed less than 1%.
Midcaps were in decline with the sole exception of Melrose Resources (LSE: MRS), which advanced 2.1%. Premier Oil (LSE: PMO) and Heritage Oil (LSE: HOIL) led the retreat with losses over 2%. Salamander Energy (LSE: SMDR) dropped 1.5%, while Dana Petroleum (LSE: DNX), JKX Oil & Gas (LSE: JKX) and Soco International (LSE: SIA) posted small losses.
Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) were flat.
US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) rallied 24% to take the lead in the sector. North American based explorer Nighthawk Energy (AIM: HAWK) and Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) followed, climbing 7.5% and 4.5% respectively.
Upstream oil and gas junior Aminex (AIM: AEX) headed in the different direction, slipping 6%.
Gold retreats as investors reap gains
Gold was in selling mode today, sliding below US$1,150/oz as investors were cashing in following a rally that saw the yellow metal post new 2010 highs at nearly US$1,170/oz amid continuing uncertainly in currency and equity markets.
Gold has been seen as a riskier investment alternative to the US dollar and moved inversely to the American currency, usually in tandem with the euro. However, the recent volatility in currencies and equities have increased gold’s appeal as a currency hedge with safe haven buying fuelling the recent rally that saw it eclipse this year’s high of US$1,161, which was set in January.
Investors have been abandoning the euro as the European debt crisis unravelled with Greece and its massive debt taking centerstage, putting pressure on equity markets on the continent and its single currency. Late last week, rating agency Fitch cut Greece’s sovereign debt to BBB- from BBB+ after downgrading Portugal to AA with a negative outlook last month. The decision came shortly after President of European Central Bank Jean-Claude Trichet said that the debt-laden country did not require financial aid at this moment.
The move by Fitch made it harder and costlier for Greece to raise sufficient funds in the market, prompting European Union leaders to provide it with a €30 billion loan facility weeks after agreeing on a financial aid package, which would be used as a last resort if the country failed to raise enough money in the market.
Gold climbed back to US$1,153/oz today after briefly slipping below US$1,150/oz, while silver and platinum retreated to US$18.14/oz and US$1,709/oz respectively.
Major miners were in decline today. In the FTSE 100, platinum miner Lonmin (LSE: LMI), silver producer Fresnillo (LSE: FRES) and gold producer Randgold Resources (LSE: RRS) moved down 2%, 1.3% and 1% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) posted a small loss.
Midcaps followed with gold miner Petropavlovsk (LSE: POG) and Aquarius Platinum (LSE: AQP) shedding 3.5% and 3.2% respectively. Silver producer Hochschild Mining (LSE: HOC) lost less than 1%.
Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) and Uzbekistan focused gold miner Oxus Gold (AIM: OXS) led the small caps, climbing 8.3%.
Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) was in decline, shedding 6.5%. Africa operating gold miner GMA Resources (AIM: GMA) and commodity asset development company Mercator Gold (AIM: MCR) lost more than 4%.
Miners pressured as base metals drop
Copper rose to US$3.56/lb, while nickel and zinc trimmed losses, climbing back to US$11.59/lb and US$1.07/lb respectively.
Base metals miners were in decline with the exception of Anglo American (LSE: AAL), which stood just above the opening level in late afternoon. Vedanta Resources (LSE: VED) and Antofagasta (LSE: ANTO) were at the bottom of the pile with losses of 2.2% and 2% respectively. Kazakhmys (LSE: KAZ), Rio Tinto (LSE: RIO) and Xstrata (LSE: XTA) shed more than 1.5%, while Eurasian Natural Resources (LSE: ENRC) declined 1.2%.
The world’s largest miner BHP Billiton (LSE: BLT) posted a small loss.
London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) went against the tide, posting a gain of less than 1%.
Tunisia focused metal miner Maghreb Minerals (AIM: MMS) led the juniors with a 90% rally.
Banks, insurance, private equity
Most financial stocks were in selling mode today. Lloyds (LSE: LLOY) was at the bottom of the banking sector with a 1.2% loss. Barclays (LSE: BARC) and HSBC (LSE: HSBA) each posted marginal losses, while Royal Bank of Scotland (LSE: RBS) and Standard Chartered (LSE: STAN) held steady.
Legal & General (LSE: LGEN) was the top performer among the insurers, advancing 2.3%. Prudential (LSE: PRU) and Standard Life (LSE: SL) posted small gains. Old Mutual (LSE: OML) shed 1.6% to slide to the bottom of the sector.
Admiral Group (LSE: ADM), Aviva (LSE: AV) and RSA Insurance Group (LSE: RSA) made little headway.
Private equity group 3i (LSE: III) was down 1%.
Small Cap Movers
Other notable movers among the small caps included developer of vision based industrial systems Seeing Machines (AIM: SEE), which added 11% after winning a contract with Freeport-McMoRan Copper & Gold Inc. (Freeport) to supply DSS driver monitoring equipment to the Safford mine in Arizona.
Large and Mid Cap News
Tullow Oil (LSE: TLW) has successfully delineated the extent of oil in the Kasamene field and discovered oil in the Wahrindi North fault block, through the drilling of the Kasamene-3 and Kasamene-3A wells in the Butiaba region of Uganda Block 2.
Small Cap News
Baobab Resources (AIM: BAO) announced that the International Finance Corporation (IFC), its joint venture partner for the Tete iron/vanadium/titanium project in Mozambique, has committed a pro rata contribution of US$700,000 for the project’s 2010 exploration programme.
North American oil and gas development company Nighthawk (AIM: HAWK, OTC-QX: NHEGY) received notification that, on 14 April 2010, certain company directors bought shares and increased their holdings in the company. In total the directors bought 300,000 shares.
Seeing Machines Ltd (AIM: SEE) has been awarded a contract to supply its DSS driver monitoring equipment to Freeport-McMoRan’s (NYSE: FCX) Safford mine in Arizona, following the previously agreed framework-agreement signed in February 2010.
Broker Fairfax has initiated coverage of Botswana focused kimberlite explorer DiamondCorp (AIM: DCP), calling its flagship Lace Diamond Mine a long-life mid-tier asset that could potentially turn the company into a takeover target if appropriate funding is secured for its development.
Anglo Asian Mining (AIM: AAZ) expects to issue a JORC-compliant report shortly which will upgrade the resource at its Gedabek gold-copper mine in Azerbaijan. Today, the company told investors that the initial results of a Phase I Realistic Mineral Resources Model Report indicates upgrades for the measured, indicated and inferred gold, copper and silver metal contents of at least 50%.
Atlantic Coal (AIM: ATC) has signed a strategic agreement with a private US coal marketing company, Xcoal Energy & Resources, to supply premium anthracite from Atlantic's Stockton mine in Pennsylvania. In a memorandum of understanding, Xcoal has agreed to purchase up to the greater of 150,000 tons per year and 50% of Stockton's annual anthracite coal production.
Discovery Metals (AIM: DME, ASX: DML) reported a strong balance sheet ahead of the commencement of construction work at the Boseto copper-silver project in Botswana, where significant progress has been made over the past quarter with the resource up 68% and the BFS (bankable feasibility study) components completed.
Fox-Davies Capital (FD Capital) issued a note on EMED Mining (AIM: EMED) today after the junior copper and gold miner outlined the current project timeline for its flagship Rio Tinto copper project in Spain, aiming to start production in Q3 2011 following the approval for the project anticipated at the end of 2010.
Goldplat (AIM: GDP) is implementing a phased exploration programme at its Nyieme gold project in Burkina Faso. In an update to investors the company said it plans to begin a Phase I trenching programme in May, with a 1,250m diamond drilling during Phase II scheduled for August.