The Weekly Highs & Lows Market Report: Oil, Gold and the Spending Review

The FTSE 100 Index hit a six-month high during the course of this week – perhaps surprisingly given that the news was dominated by gloomy discussion of plans for quantitative easing, and the austerity measures faced by Britain. One way to understand better the underlying pulse of the market is by looking at the stocks and sectors making new 12 month highs or lows.

This week, there were 75 new highs this week, compared with 34 new lows. Commodities were the principal watchword, with resources companies dominating the new highs list, while the Comprehensive Spending Review led to some big winners and losers. 

Oil 

Amongst the explorers, the excitement has been around North Sea explorer, Xcite Energy (LON:XEL) which is drilling to prove the commerciality of its Bentley field, and Kazakhstan-focused E&P company, Max Petroleum (LON:MXP) which announced a success in drilling its Uytas prospect and Petroneft Resources (LON:PTR), the Russia-focused oil and gas explorer which raised £27m last week to finance the development of two of its Russian fields. The astonishing ascendancy this week though has been at oil and gas-focused investor and adviser, Parkmead Group, up 90% on the news that Tom Cross was to become executive chairman, with investors wondering whether this could become “son of Dana”. Tom is the founder and outgoing chief executive of Dana Petroleum Plc (LON:DNX), which succumbed recently to a £1.87bn takeover by Korea National Oil Corporation (KNOC).

Gold

Although gold has corrected sharply this week, it’s still close to its recent highs. A couple of companies reaping the rewards of gold strength this week were African explorer, Central African Gold (LON:CAN) which soared after reporting positive reserves updates from its Zimbabwean gold mining properties, European Goldfields (LON:EGU), which mines zinc, lead and gold in Greece and Kefi Minerals Plc (LON:KEFI) , the Turkey and Saudi Arabia operating gold and copper explorer.  Linked to the fortunes of gold, this week saw a new high from H & T Group (LON:HAT) , the country’s leading pawnbroker with 120 outlets throughout the UK. Other miners that saw success this week were Beowulf Mining (LON:BEM), the Swedish mineral exploration company, and Berkeley Group Hldgs (LON:BKG) Mineral Resources, focused on processing the leftovers from processed ore in Zambia.

Spending Review

The impact of the Spending review was felt on a number of businesses this week. Eaga Plc (LON:EAGA), which runs the state- funded Warm Front heating insulation program, fell 22% to a new low after the Coalition government cut the initiative to help reduce the public budget deficit. According to Arabella Llewellyn, an analyst from Canaccord Genuity Ltd, “Warm Front was Eaga’s largest contract, previously accounting for 50 percent of revenues”. In stark contrast, Stagecoach Group (LON:SGC) surged along with Firstgroup (LON:FGP) Plc after the Chancellor confounded market expectations by saying he’ll leave the bulk of fuel subsidies for bus companies intact, despite the country’s deepest-ever budget cuts. Stagecoach operates a fleet of 7,000 buses that carry 2 million people a day,

The Spending Review decision to take the axe to its budget for social housing hurt both Barratt Developments Plc (LON:BDEV) and Taylor Wimpey Plc (LON:TW.) which both hits new lows. The social housing sector provides homes at below-market rents for nearly four million households and the chancellor announced on Wednesday that the government would reduce the number of affordable homes it planned to build by 30 percent to 150,000.

Elsewhere, notable new highs were seen from high specification foam maker Zotefoams which announced strong sales growth in the three months to September, only partly offset by higher polymer prices. Titan Europe (LON:TSW), the maker of steel wheels and undercarriages for off highway vehicles, was also up, said to be reflecting the read across from Caterpillar’s strong results (Caterpillar is a major client).

Given the generally dire state of the publishing market, it was encouraging to see a new high from specialist magazine publisher, Future Plc which has enjoyed a run of recent success. In contrast, Johnston Press (LON:JPR) hit a new low, with its stock down 9%, prompting three directors to buy shares. Interestingly, the CEO John Fry reportedly wrote to the BBC Trust recently asking the body to limit the number of online news stories by the BBC to three per region.

All these names of course require a lot more research before making any investments, long or short, but by tracking the sectors and names that are featuring more prominently in new highs and lows lists, you can get a very good sense of where the action lies and where the real stories of the week are to be found.