FTSE up as BP rebounds but miners fall on Australian tax confusion

The UK’s blue-chip index has opened with the potential for a third successive day of gains, spearheaded by a rebound of BP (LON:BP) stocks which recovered some of the losses made yesterday. The mining sector has dropped some of the gains yesterday as confusion continues to reign over the 40 per cent tax on mining company profits and analysts predict some investor caution following the new Japanese Prime Minister’s announcement that the county’s debts put it at risk of collapse.

Kate Neilson
shareprices.com - Friday, June 11, 2010

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BP Chairman Carl-Henric Svanberg will meet President Obama next week

BP’s Gulf of Mexico oil spill woes continued to worsen today after a US geological survey said the amount of oil predicted to have leaked from the damaged deep-sea well is double the original estimate. The study suggested as many as 40,000 barrels – the equivalent of 1.7m gallons - of oil a day may have been spilling out of the blown-out well. The report follows the news late last night that the Obama administration had asked the Chairman of BP, Carl-Henric Svanberg (pictured), to meet the US President at the White House next week to discuss the situation and the huge clean-up operation that will follow. And with BP CEO Tony Hayward confirming that the group is considering cutting its dividend to help fund the oil spill damages, the collective news this morning looks damaging for the oil giants.

However, BP has received some backing in the last two days from politicians and influential figures who have voiced disapproval of the reaction to the spill by the US Government and President Obama. Mayor of London Boris Johnson spoke out about the matter yesterday stating the “anti-British rhetoric” aimed at BP over the spill is becoming a matter of national concern.

During an interview on Radio 4 yesterday, Mr Johnson said: “I do think there’s something slightly worrying about the anti-British rhetoric that seems to be permeating from America.

“I would like to see a bit of cool heads and a bit of calm reflection about how to deal with this problem, rather than endlessly buck-passing and name-calling.

“When you consider the huge exposure of British pension funds to BP and to BP’s share price, and the vital importance of BP, it starts to become a matter of national concern if a great British company is being continually beaten up on the international airwaves.”

Chairman of British general insurance company RSA John Napier also voiced his opinion in an open letter tagging Obama as anti-British and questioned his ability to “take the heat when under pressure”.

The growing support for BP has nudged the group’s share price higher this morning. The shares are over seven per cent up with the share price edging closer to regaining 400p status.

Mining stocks haven’t managed to continue yesterday’s impressive gains with the sector hit by growing confusion over the huge 40 per cent tax charge on group profits in Australia. The supertax has been categorically opposed by the sector and optimism had grown yesterday that changes would be implemented to the plans. However, Australian Prime Minister Kevin Rudd has dashed those hopes this morning by saying the tax would still go ahead but will not be implemented for weeks if not months as consultation continues. The two per cent sector gains of yesterday have been numbed with BHP Bilton (LON:BLT), Eurasian Natural Resources (LON:ENRC), Kazakhmys (LON:KAZ) and Lonmin (LON:LMI) only posting gains of between 0.1 per cent and 0.6 per cent at 10:00BST. Xstrata (LON:XTA) is the outstanding stock with a one per cent gain, but Anglo American (LON:AAL), Antofagasta (LON:ANTO), Rio Tinto (LON:RIO) and Vedanta Resources (LON:VED) are all down by as much as 1.7 per cent.

The banking sector is also being invested in with concerns this morning after Naoto Kan, the newly appointed Prime Minister of Japan, said “Our country’s outstanding public debt is huge” and “Our public finances have become the worse of any developed country”. He also added: “Like the confusion in the eurozone triggered by Greece, there is a risk of collapse if we leave the increase of the public debt untouched and then lose the trust of the bond markets." The news hasn’t helped RBS (LON:RBS) and Lloyds Banking Group (LON:LLOY) which are trading flat at 10:00BST.

The FTSE 100 index has gained 33 points at 10:00BST to reach 5165.86 – a gain of 0.6 per cent.

 

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