Borders & Southern shares soar on Falklands gas hit

15.45: Borders & Southern (BSTH.L), the London-listed, Falklands-focused oil and gas explorer, is the star performer on today’s topsy-turvy UK equity market, shooting 36% higher after an analysis of one its wells came up trumps, showing 190 million barrels of gas condensate may be recoverable.

The company is now planning more drilling at the Darwin field after today's result which analyst Brendan Long at Merchant Securities described as 'excellent'.

The company – one of several threatened with legal action by Argentine president Cristina Fernandez for searching for energy off the disputed Falkland Islands – stated: ‘Given the encouraging results from the Darwin well, the Company will start planning the next drilling programme, which is likely to include both exploration and appraisal wells. The timing of drilling will be dependent on rig availability, but realistically this will not occur before 2014.’

‘The Company is currently exploring the best way to fund the next phase of the programme, including the possibility of now bringing in partners.’

Seymour Pierce reiterated its ‘buy’ recommendation on the AIM-listed shares, which are up 36% at 27p. Merchant's Long upgraded the shares from 'under review' to 'buy', saying: 'We will sharpen our pencils tonight for our target price. However, from the outset, we believe the market is under-appreciating this news.'

The shares are still considerably down since the start of the year, having crashed 70% on one day in July after the company announced it was abandoning its Stebbing well having not found commercial quantities of gas. Investors have since then been pinning their hopes on good news from the Darwin field.

Markets cling onto stimulus hopes

14.20: After a quiet start to the week, investors have had lots of real economic indicators to chew on today.

First there was the signal from the US Federal Reserve that it is likely to deliver another round of monetary stimulus 'fairly soon' unless the economy improves considerably.

Weak Chinese manufacturing data reinforced hopes that the world’s second largest economy will also need stimulating.

In Europe, a gloomy Markit Flash eurozone PMI showed little change in August at 46.6, up from a final reading of 46.5 in July and marking the seventh successive month of contraction (a reading above 50 indicates expansion).

This afternoon US jobs data showed the number of Americans filing new claims for jobless benefits increased to 327,000 last week – a rise not expected by economists. A reading of US manufacturing activity did, however, beat expectations, with the Markit Flash US Manufacturing PMI showing a small improvement in August, hitting 51.9, up from 51.4 in July.

 

The markets are being swayed by the now familiar push-pull of bad data adding to worries about economic strength – but also enthusing markets by adding to expectations of stimulus.

The FTSE 100 has dipped back below the 5,800 mark, though remains in positive territory, up 0.1% at 5,783, supported by mining company shares.

European indices are not performing so well, with the French CAC 0.8% lower and German Dax off 0.7%. Spain's Ibex index is faring worse, down 1.5%, while the country's borrowing costs rise, with 10 year bond yields back above 6.4%.

US stock futures are pointing to small opening losses on the S&P 500 and Dow Jones index.

Diageo cheers investors with dividend hike

10.11: Strong sales in emerging markets – particularly Latin America and the Caribbean – helped booze company Diageo (DGE.L) narrowly beat City expectations over the past year, and raise its dividend by 8% to 43.5p per share.

The Guinness maker reported a 9% rise in operating profits with what analysts at Jefferies described as a ‘strong finish to the year’, with only the company’s European market remaining ‘subdued’, but emerging markets strong and management confident.

Emerging markets, which account for almost 40% of Diageo's business, grew net sales 15% and operating profit 23% in the full year, which cover the period to the end of June. The company’s exposure to fast-growing markets such as China has attracted investors who want exposure to emerging markets but through London-listed companies; the Citywire Top Stock is a major holding for Nigel Thomas in his AXA Framlington UK Select Opportunities fund.

Commenting on today’s results announcement, Diageo chief executive Paul Walsh said: ‘A year ago I set out our expectations for the medium term and these results put us firmly on track to meet those goals.’

Shares in the company have risen steadily and strongly this year, up 15% so far. Today they are up by 0.9% to 1695p. 

Analysts at Berenberg, who have a 'buy' rating on the shares, said: 'Diageo is not the ultimate safe haven, as c.40% US exposure creates short-term risks in relation to the US fiscal cliff, but it is a well managed, relatively low risk stock.'

Analysts at Canaccord Genuity today raised their target price for Diageo by 3% to 1500p, but maintained their ‘hold’ rating.

Petropavlovsk shares slump on weak earnings

09.03: Half-year figures from Russia-focused mining company Petropavlovsk (POG.L) showing a 90% decline in net profits disappointed investors today, wiping nearly 12% of the share price.

The London-listed group, which has four gold mines in Russia, reported earnings per share (EPS) of just $0.08, compared with $0.57 for the first six months of 2011. ‘This headline disappointment should be viewed against the background that it was caused mainly by non-cash items such as a US$60.8 million increase in depreciation charges and foreign exchange translation losses of US$3.4 million,’ said Peter Hambro, Petropavlovsk chairman, in the company’s statement.

Hambro said that with regards to ‘production, costs, sales price and cash flow generation’, the group had an ‘extremely good start to the year’.

Analysts at Nomura described the results as ‘underwhelming’. They noted that capital expenditure had been higher than expected.

One of the group’s key projects has been its ‘pox’ plant, which has created investor uncertainty.

Analysts at Canaccord Genuity said: ‘At present the shares are pricing in a 54% chance that its POX related investments do not result in a single ounce of gold being produced. Over the coming reporting periods, as management rebuilds investor confidence in it, we believe that discount is likely to close.’

Analysts at Liberum agree that market concerns over the Pox plant will cap the share’s outperformance, and yesterday downgraded them from a ‘buy’ to ‘hold’.

Fed stimulus signals encourage investors

08.20: European markets opened higher as the US Federal Reserve gave a strong signal that it will soon ease conditions for the weak economy, while weak Chinese manufacturing data reinforced hopes that the world’s second largest economy will also need stimulating.

According to the minutes from the 31 July to 1 August meeting, the Fed is likely to deliver another round of monetary stimulus 'fairly soon' unless the economy improves considerably.

Marc Ostwald of Monument Securities said ‘while it is clear that the Federal Open Market Committee is ready to implement further monetary policy accommodation’, the emphasis remains on ‘jawboning’.

‘Nevertheless, these minutes will be enough to have many forecasters and commentators to bring forward their expectations for further easing,’ Ostwald added.

In China, the HSBC flash manufacturing PMI fell sharply to 47.8 – a nine-month low – in August, from 49.3 in July; anything below 50 indicates a contraction. The figure is the latest of a string of weak data releases in China, where economists keep hoping to see indications that the economy has bottomed out.

Also this morning, a GDP growth reading for Germany confirmed second-quarter GDP growth in the eurozone’s biggest economy of 0.3%. This is down from 0.5% in the first quarter of 2012, but shows the economy is still resisting the grips of recession.

Britain’s FTSE 100 is nearly 0.5% higher, regaining the 5,800 mark. The Eurofirst 300 has also risen by 0.5%.

The euro is 0.3% higher at $1.256, while the oil price has risen by 0.9%, with Brent crude futures trading at $115.