After yesterday’s strong performance on the heels of positive news from the US led by a string of better than expected earnings reports from key businesses, the UK markets opened with considerable losses, signalling a possible end to the 7 day streak of gains, longest since 2005.
BHP Billiton (LSE:BLT) released its annual production report this morning stating that China, the key force that has been bolstering the mining industry amid plummeting demand in key markets, had sufficient inventory and had ceased placing orders. At the same time, re-stocking activities commenced in North America, Europe and Japan. The world’s largest miner said it was hard to detect underlying demand trends, which are masked by stocking and re-stocking activities.
The report dragged down the mining industry considerably, taking a toll on key UK indices.
The mining sector lost 282 points by 1pm. After 7 straight days of growth, FTSE 100 melted down to 4450, but then made gains and rebounded to 4477, bringing the total losses to just 4 points.
Mining companies were among the biggest losers. Kazakhmys (LSE:KAZ), Hochschild Mining (LSE:HOC) and Lonmin (LSE:LMI) declined by 5.0%, 3.9% and 3.5%, respectively. Most miners posted losses. Aquarius Platinum (LSE:ASX) was down 3.8% and Johnson Matthey lost 1.2%.
BHP’s own losses amounted to 3%.
Other big diversified miners also suffered losses. Anglo American (LSE: AAL) was down 1.3% in the morning, Xstrata (LSE: XTA) was down 3%, aliminating the previous day’s gains and Rio Tinto (LSE: RIO) moved 1.7%.
Gold and silver producers were more mixed. Randgold Resources (LSE: RRS) remained unchanged in the morning, Peter Hambro Mining (LSE: POG) underwent a correction after yesterday’s strong gains, declining by 2%. Yamana Gold (LSE: YAU) was down 1%. Silver producer Fresnillo (LSE: FRES) also lost 1%.
Junior Gold companies were once again mixed. Kryso Resources (AIM: KYS) and Pan African Resources (AIM: PAF) were unchanged, as was Patagonia Gold (AIM: PGD) and Oxus Gold (AIM: OXS). Cluff Gold (AIM & TSX: CLF) lost 1.3%. Medusa Mining (AIM & ASX: MML) gained 4% after a positive quarterly activities report this morning.
Coal producer Eurasian Natural Resources (LSE: ENRC) followed the general market trends and declined by 1.6%.
Oil & Gas producers remained stable. BP (LSE: BP.) and Shell (LSE: RDSB) moved insignificantly as did Dragon Oil (LSE: DGO). Cairn Energy (LSE: CNE) rose 1% for a second day running, Dana Petroleum (LSE: DNX) lost yesterday’s gains by going down a little less than 1%.
Copper held steady after Tuesday’s correction, remaining around $2.43/pound, nickel continued to decline, slipping to $7.14/pound. Zinc and lead also fell insignificantly. Brent Crude finished at $65.6/barrel yesterday. Precious metals all continued slipping as gold, silver and platinum fell to US$946/ounce, $13.47/ounce and $1166/ounce respectively.
Insurance, banks, private equity
Banks and insurance groups performed differently from yesterday, but all changes that occurred this morning were insignificant.
RBS (LSE: RBS) was stable with insignificant gains, while Lloyds Group (LSE: LLOY) slipped 2.3% after rising 3% yesterday. After losing about 1% on Tuesday, Barclays (LSE: BARC) and HSBC (LSE: HSBA) were headed in different directions with the former losing 2.7% and the latter upped 0.5%. Standard Chartered (LSE: STAN) climbed 1%.
Insurance groups did worse than on Tuesday. Legal & General (LSE: LGEN) lost 1.7%, which equals the gains it made yesterday, Prudential (LSE: PRU) remained unmoved and Aviva (LSE: AV.) lost 1% as did private equity group 3i (LSE: III).
Morrison’s (LSE: MRW) drove the market up with strong gains on Tuesday, but today slipped 1.3%. Next plc (LSE: NXT), which suffered losses yesterday, moved up by less than 1%.
Large Cap News
BHP Billiton PLC (ASX: BHP; LSE: BLT) issued a production report for the financial year to end-June 2009, saying the period proved to be very challenging, with significant demand contraction exacerbated by dramatic movements in inventory levels. In the context of this environment, BHP Billiton achieved a solid operational performance, despite making production adjustments across a range of commodities, including metallurgical coal, nickel and manganese.
Britain’s largest retailer Tesco (LSE:TSCO) has picked haulage and logistics operator Stobart Group (LSE:STOB) to be the distributor at Tesco’s new 1.2 million sq ft import centre at Teesport, Middlesborough.
BT Group PLC (LSE: BT) said it has agreed a deal with Vodafone Group PLC (LSE: VOD) under which it will transfer its Irish consumer and small business broadband and voice customer base to Vodafone and provide wholesale network services to underpin Vodafone's business over a seven-year period. The value of the gross assets that are the subject of this transaction was €4.8 million at the end of March 2009.
Small Cap News
Solar Integrated Technologies Inc (AIM: SIT) said it has agreed to be acquired by US group Energy Conversion Devices Inc (NASDAQ: ENER) at a price of US$0.11 per share, valuing the group at US$11.2 million. Including the assumption of SIT's net debt obligations, the purchase price will be approximately US$16.3 million. ECD plans to finance the acquisition from existing corporate funds.
Property investment and development group Helical Bar PLC (LSE: HLCL) said it is now starting to see much improved signs in parts of the UK market, with the valuation of certain types of assets clearly levelling out. In an interim management statement covering the first quarter to June 30 2009, it said since reporting full-year results in June, Helical has seen an improvement in value in respect of properties let on long leases to tenants of undoubted covenant strength.
Medusa Mining (LSE:MML) today released its quarterly report listing production highlights for the period ended June 30. The company completed Phase I expansion to an annualised production of 60,000 ozs ahead of schedule, currently moving on to Phase II expansion, aimed at bringing the annualised production up to 100,000 ozs in Q1 2010.
Due to high investor demand, Forte Energy (ASX/AIM: FTE) has increased the amount raised in a placement by 20% to $12 million. A total of 120 million shares were issued at 10 cents each to sophisticated investors in North America, the United Kingdom and Australia.
Specialist pharmaceutical company, Sinclair Pharma (AIM: SPH) released a trading update this morning for the full year ended 30 June 2009. In the statement, the company maintained its EBITDA, thanks to a string of operational efficiency initiatives and prudent cash management which offset lower revenues. Sinclair Pharma reported that it had witnessed de-stocking by wholesalers, which in turn impacted orders for its products – hence the lower than expected revenues of £29.7 million for the full year.
China-based enterprise content management (ECM) software provider GEONG International Ltd (AIM: GNG) said it has signed a contract extension with an international telecommunications group. The agreement sees GEONG extend its high-level management consultancy contract with the client for a period of one year, from April 1 2009 to March 31 2010.
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