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Sunday 30th of January 2011
January 26, 2011    

Heritage Oil drops 29 percent on discovery disappointment

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by Elaine Frei
Heritage Oil drops 29 percent on discovery disappointment

European equities markets made gains Wednesday ahead of a new decision on interest rates from the US Federal Reserve as analysts expected that the statement accompanying the decision will recognize that economic data from the US has improved since the Fed’s previous meeting.

The FTSE 100 was 0.87 percent higher to 5,969.21 in London, while the FTSE 250 added 0.96 percent to 11,612.3.

The energy sector was in focus as oil and gas explorer Heritage Oil (LSE: HOIL) dropped 29 percent to lead declines on the 250 after it announced that it discovered natural gas rather than the expected oil while exploring a field in Kurdistan.

On the other hand, BG Group (LSE: BG) added 3.43 percent on a discovery of light oil off the coast of Brazil, while the best performance in the energy sector came from oil explorer Exillon Energy (LSE: EXI), which was up 4.53 percent.

Other decliners in the sector included BP (LSE: BP), with a decline of 1.07 percent, while oil and natural gas explorer Afren (LSE: AFR) dropped 3.16 percent.

Most miners were higher on increased metals prices, led by a 7.46 percent gain for Kenmare Resources (LSE: KMR), while a few decliners in the sector were led lower by Randgold Resources (LSE: RRS), which was down 2.39 percent.

The biggest decline on the 100 came from electricity and natural gas utility Scottish & Southern Energy (LSE: SSE), currently trading ex-dividend, which fell 3.05 percent.

Engineering group Renishaw (LSE: RSW) was the best performer on the 250, adding 19.7 percent, while Aggreko (LSE: AGK), which offers power generators for hire, added 5.32 percent for the best day on the 100.

The FTSE Eurofirst 300 was up 0.76 percent to 1,152.84 while the IBEX added 0.06 percent to 10,670.7, the CAC-40 was 0.73 percent higher to 4,049.07 and the Dax gained 0.97 percent to 7,127.35.

Most markets in the Asia-Pacific region were higher, but India’s Sensex was down 0.95 percent to 18,969.4 and Tokyo’s markets were also lower.

The Nikkei 225 fell 0.6 percent to 10,401.9 in Tokyo, while the Topix index was down 0.71 percent to 922.64 and the Mothers market dropped 0.19 percent to 459.01.

Eisai Co (TYO: 4523) dropped 5 percent after final-stage trials on an experimental drug for the treatment of sepsis proved it no more effective than a placebo, resulting in downgrades from several brokers, with Deutsche Bank cutting the drug maker from “hold to “sell” while Citigroup dropped it from “buy” to “sell” and Credit Suisse reduced its recommendation from “outperform” to “neutral”.

Traders were down on lower prices for oil and metals, with Mitsubishi Corp (TYO: 8031) down 1.7 percent while Mitsui & Co (TYO: 8031) was 1.9 percent lower.

Carmakers also saw declines as Nissan Motors (TYO: 7201) fell 1.3 percent and Toyota Motor (TYO: 7203) dropped 1.9 percent.

Hong Kong’s Hang Seng was up 0.23 percent to 23,843.2, while the Taiex added 0.71 percent to 9,055.59 in Taiwan, South Korea’s Kospi was 1.14 percent higher to 2,110.46, the Shanghai Composite was up 1.17 percent to 2,708.81 and the Straits Times Index gained 1.25 percent to 3,220.78 in Singapore.

Australia’s markets were closed in observance of Australia Day.

New York markets were higher in midday trade, with the Dow Jones Industrial average up 0.09 percent to 11,988.1, while at the same time the S&P 500 had added 0.4 percent to 1,296.35 and the Nasdaq Composite was 0.69 percent higher to 2,737.92.

Crude oil prices were higher, with West Texas Intermediate crude up 47 cents in New York trade at midday, while Brent crude was lately reported nearly $2 higher in London.

The gains for crude came despite new inventories data from the US Energy Information Administration showing that US crude stockpiles were up by 4.8 million barrels, last week, against expected gains of only around 900,000 barrels, while gasoline inventories were also up a bit more than anticipated and distillates in storage fell although the drawdown was smaller than expected.

Gold prices were lower in midday trade in New York, but silver and copper both saw prices advance.

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