Footsie left to sing the blues
EDDIE Cochran got it right when he said there ‘ain’t no cure for the summertime blues’. In the City the words of the 1950s rocker had a certain resonance as despondent dealers watched the Footsie trade below 5,000 for a time. It was dragged down yet again by a further hefty fall in oil giant BP. Its shares got below £4 on continuing concern about the ongoing oil spill disaster in the Gulf of Mexico before making a lukewarm recovery.
And the bad news didn’t stop there. Fitch, the credit rating agency, stuck its big oar in and hit sentiment with a warning that the UK faced a ‘formidable’ challenge to bring down its huge budget deficit. The new coalition government must be more ambitious in slashing the deficit as the UK had the fastest rising debt ratios of any of the higher rated economies and is hanging on to its AAA credit rating by the skin of its teeth.
Fitch’s comments saw the Footsie drop to 4984.66 before closing 40.91 points lower at 5,028.15, while the FTSE 250 shed 121 points to 9,356. Wall Street edged higher initially after Federal Reserve boss Ben Bernanke said the US economy appeared to have enough momentum to avoid a double-dip recession.
Yet more sabre-rattling by President Obama, who had the temerity to say that he would sack chief executive Tony Hayward if he could, and rumours that he could soon call for all of BP’s licences in the US to be suspended, sparked another big sell-off. The shares skidded to a two-year low of 396.8p before rallying to finish 21.4p or 5pc off at 408.95p.
Banks took another pasting amid fears that stricter regulations and a new tax levy would severely dent profits. Lloyds Banking Group, 42pc-owned by the UK taxpayer, lost 2.2p
by Geoff Foster more to 51.78p, while the 83pc-owned Royal Bank of Scotland cheapened 1.64p to 41.43p. Barclays lost a further 9.35p to 276.6p.
Staring relegation from the Footsie in the face, travel group Thomas Cook lost 5.8p to 190.7p and the London Stock Exchange dipped 13p to 598.5p.
Miners bucked the trend with the world’s largest primary silver producer Fresnillo up 41.5p at 939.5p. Dealers continued to hear gossip that Carlos Slim, the Mexican telecoms and cement tycoon and the world’s richest individual and worth around £35bn, is interesting in bidding for the group at around £8bn or £12 a share.
Reflecting the record gold price of $1251.05 an ounce, Randgold Resources jumped 135p to 6095p and BHP Billiton 33p to 1768.5p.
In anticipation of its inclusion into the FTSE All Share index, gold producer Centamin Egypt advanced 7p to a record 165p. It also announced a better-than-expected increase in resource estimates for its flagship Sukari project. Total resources at the end of June 1 rose to 14.5m ounces and since March 2008, the company has grown the resource at 115,000 ounces per month.
Falkland Island go-go stock Rockhopper Exploration gushed to 310p and closed 5.75p to 295.5p following news of a successful £48.5m share placing at 280p a share, masterminded by broker Canaccord. Cash raised will cover the planned flow-test on Sea Lion prospect and working capital.
It follows the £50m raised by Canaccord last October and broker Evolution says that the new amount raised will not be enough to cover further appraisal wells on Sea Lion. It expects further fundraising later in the year but remains bullish.
Other Falkland stocks were sold as some investors raised cash for new Rockhopper stock. Desire Petroleum slumped 12.75p to 92.25p and Borders & Southern 2.25p to 67.5p.
Manchester-based manufacturer of industrial chains Renold declined 2.25p to 25.5p following news finance director Peter Bream is leaving the company. Full-year results were in line with expectations and analysts believe there are good recovery prospects.
Gooch & Housego, the specialist manufacturer of optical components, jumped 22.5p to 203.5p on better-than-expected interim results. Investec upgraded its full year earnings per share estimates for this year and next by 24pc and 27pc respectively.
A bullish trading update lifted Titan Europe 2p to 33.75p. The maker of wheels for mining, construction and agricultural vehicles, said it expects 2010 trading to beat market expectations.
Awaiting further news of the takeover ‘approaches’, support services company Scott Wilson eased 0.75p to 114.75p. US companies AECOM and URS was mentioned as possible bidders by Panmure Gordon. The broker’s target price is 127p.