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28th of August 2010
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August 25, 2010    

BP down on new US deepwater drilling regulations

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by Elaine Frei
BP down on new US deepwater drilling regualtions

European equities markets were lower again Wednesday on more bad economic news from the United States as new home sales dropped to the lowest on record in July, while durable goods orders rose there last month, but by much less than had been forecast.

After the National Association of Realtors reported yesterday that existing home sales were down 27.2 percent last month in the US, the Commerce Department reported today that new home sales dropped 12.4 percent from June figures, while a separate report from Commerce showed that US durable goods orders rose only 0.3 percent in July, against an expected increase of 2.7 percent.

The FTSE 100 was down 0.9 percent to 5,109.4 in London, while the FTSE 250 dropped 0.8 percent to 9,623.56.

BP (LSE: BP) was down 0.19 percent on the session after the US government announced new rules requiring oil companies to obtain third-party verification that their blowout prevention equipment is in good working order before they can restart deepwater offshore operations in the Gulf of Mexico.

The new regulations could mean that companies operating deepwater rigs in the Gulf could have restarts delayed until the middle of 2011.

Elsewhere in a mostly lower energy sector, oil and gas explorer Tullow Oil (LSE: TLW) dropped 4.55 percent for the worst performance in the sector after it said that a tax dispute between Heritage Oil (LSE: HOIL) and the government of Uganda could hold up its acquisition of Heritage’s assets there.

Heritage declined almost as much as Tullow, dropping 4.51 percent on the session.

There were only five gainers in the mining sector, each with most or all of their operations in gold mining, led by Hochschild Mining (LSE: HOC) with a gain of 1.72 percent, while Centamin Egypt (LSE: CEY) added 1.43 percent, Petropavlovsk (LSE: POG) was up 1.5 percent, Randgold Resources (LSE: RRS) was 0.17 percent higher and African Barrick Gold (LSE: ABG) added 0.09 percent.

The biggest decline among miners came from iron-ore miner Ferrexpo (LSE: FXPO), which was down 3.83 percent.

The best performance on the 100 came from business services company Serco Group (LSE: SRP), which added 4.83 percent, while generator rental group Aggreko (LSE: AGK), dropped the most on the index with a decline of 5.81 percent.

Over on the 250, educational products group Promethean World (LSE: PRW) gained the most, adding 4.87 percent, while business processing group Xchanging (LSE: XCH) was down 10.79 percent for the biggest decline on the 250 and in London generally.

The FTSE Eurofirst 300 was down 0.67 percent to 1,012.69 while the Dax fell 0.61 percent to 5,899.5, the CAC-40 was 1.17 percent lower to 3,450.19 and the IBEX dropped 1.57 percent to 9,894.

Markets in the Asia-Pacific region were lower as investors worried that the economic recovery is failing after US data showed that existing home sales there fell 27.2 percent in July and after Standard & Poor’s reduced Ireland’s credit rating to AA minus.

The Nikkei 225 was down 1.66 percent to 8,845.39 in Tokyo, while the Topix index fell 1.27 percent to 807.31 and the Mothers market dropped 1.99 percent to 359.25 after media reports cited unnamed sources as saying that if the yen keeps climbing, the government might intervene.

The yen was stronger again versus both the US dollar and the euro as investors sought it out as a safe place to put their cash.

Continued gains for the Japanese currency sent exporters lower, with camera maker Nikon (TYO: 7731) down 2.6 percent and camera while copier manufacturer Canon (TYO: 7751) fell 2.7 percent.

Among carmakers, Toyota Motor (TYO: 7203) was down 2.4 percent and Honda Motor (TYO: 7267) dropped 3.1 percent.

Elsewhere in the region, the Hang Seng was 0.11 percent lower to 20,634.98 in Hong Kong while India’s Sensex was down 0.72 percent to 18,179.64.

The Sydney Ordinaries and the S&P/ASX200 each dropped 1.4 percent in Australia, to 4,356.6 and 4,320.1 respectively.

South Korea’s Kospi fell 1.46 percent to 1,734.79, the Shanghai Composite was 2.03 percent lower to 2,596.58 and the Taiex was down 2.56 percent to 7,736.98.

The Straits Times Index defied trends and added 0.13 percent to 2,926.55 in Singapore.

The news on new home sales and on durable goods orders in the US hurt New York markets.

Commerce Department data showed that while overall, durable goods orders were up slightly last month, that gain was driven by a 13.1 percent gain in transportation orders and that absent those, orders were down 3.8 percent in the month.

Data showed that new home sales in the US, down to their lowest level on record in July, were down in all four regions of the country, led by a 25.4 percent decline in the West, followed by a 13.9 percent decline in the Northeast, while home sales in the South fell 8.7 percent and sales in the Midwest fell by 8.3 percent.

At just before 1 p.m. in New York, the Dow Jones Industrial Average was 0.4 percent lower to 10,000.57 while the S&P 500 had dropped 0.49 percent to 1,046.75 and the Nasdaq Composite was down 0.18 percent to 2,119.99.

Crude oil prices were mixed in midday trade in New York, with West Texas Intermediate crude down a bit but Brent crude up slightly, while metals prices were also mixed as copper declined but gold and silver prices saw gains.

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