Stocks get hammered on both sides of Atlantic

The FTSE 100 finished down 142 points or 2.5% at 5,411 as investors fretted that Greece’s debt crisis could spread to other euro zone members, particularly Portugal and Spain. The DOW Jones Industrials dropped as much as 270 points this afternoon and is currently down 243 points at 10,907. Tech stocks in the U.S. fared even worse with the Nasdaq composite currently down 77 points or 3% to 2,421 with Google (GOOG) down 4.5% to $506 and Advanced Micro Devices (AMD) down 7% at 8.6%. The falls in the U.S. were despite upbeat quarterly earnings updates from pharmaceutical companies, Merck (MRK) and Pfizer (PFE). Commodity stocks were hit earlier in the day as news of an Australian mining super tax emerged over the weekend.

Markets suffer on further European debt fears and commodity sell off

Today the euro fell to a 12-month low against the dollar on skepticism over the Greek government's ability to carry out harsh austerity measures required by the EU/IMF aid package. The DOW Jones Industrials are currently down 155 points to 10,996, the Nasdaq composite is down 55 points at 2,441 and the FTSE 100 is down 100 points at 5,441. Although the German government negotiated to provide the majority of the European Union contribution to Greece, there are fears that Angela Merkel may not get a crucial vote passed to allow the aid to be used.

In the UK, miners and BP dragged down the FTSE 100 index. BP (BP.) is currently down 4% to £5.52 on fears that the clean up bill and compensation payments may amount to as much as $10 billion, only some of which will be covered by liability insurance policies. BHP Billiton, Xstrata and Rio Tinto were all down on news of the Australian resources super tax. BHP (BHP) is currently down 7% to £18.86, Xstrata (XTA)is down 6% to £10.21 and Rio (RIO) is down 4.8% to £32.14.


The correction has given an opportunity to start a little buying after several weeks of sells. The FTSE 100 has been bought at 5,431 and DOW at 10,988. Coal of Africa (CZA) position initiated at 130p. Ithaca Energy (IAE) position increased at 176p.

Ithaca Energy drop gives opportunity to buy back

After selling half of my Ithaca Energy (IAE) holding on Friday, an 8% drop today, following a similar fall on the Toronto Stock Exchange (TSX) last night gives an opportunity to buy back. The negative impact of the Australian mining super tax on the commodity sector and a "take profits" story on thisismoney.co.uk helped to move the price down. As far as I'm aware none of Ithaca's assets are based in Australia so the "Henry tax" will not impact earnings.

However, some signifcant news on the sidetrack of the Stella field are expected any day. On 15th April, IAE said "The well will now be geologically sidetracked, as intended, to test the reservoir up-flank between this vertical bore and existing crestal wells to further investigate the quality of the reservoir and provide essential compositional information of the hydrocarbons at intermediate depths. The sidetrack will take approximately 15 days to penetrate the reservoir."

Australian miners fall on new plan for mining tax

The Australian government says it will impose a Resource Super Profits Tax — also known as the Henry Tax, after the Treasury Secretary Ken Henry — starting from July 2012 on earnings after exploration, capital and dividend payments. Officials said the tax would help the Australian economy and make the system "fairer and simpler" for Australia's working families and businesses. The tax on all mining projects there from July 2012 to raise A$12 billion in the first couple of years. The revenues will be used to trim 2 per cent from the company tax rate and increase pension contributions.The minister for Resources and Energy, Martin Ferguson, said that a "significant proportion of funds" raised from the tax "will be returned to the resources industry through a new resource exploration rebate and investments in the infrastructure," and that the mining sector will also benefit from a lower company tax rate.

Prime Minister, Kevin Rudd, said “Resource profits were more than A$80 billion higher over the past decade, but the Australian people received only an additional A$9 billion. BHP is 40 per cent foreign-owned, Rio Tinto is more than 70 per cent foreign-owned. That means these massively increased profits ... built on Australian resources are mostly going overseas. It’s time for the Australian people ... to get a fairer share of the natural wealth of this country, which ultimately is owned by all Australians.”

The news sent mining stocks operating in Australia such as BHP Billiton down around 2% on the U.S. and Australian market's after falling more heavily earlier in the day. BHP Billiton's Chief Executive Martin Kloppers said in a statement that the tax would result in an increase in the total effective tax rate on the company's profit earned from its Australian operations, from about 43% currently to around 57% from 2013. Xstrata PLC's Chief Executive ,Mick Davis, said that the the proposed tax reduces "the very cash flows that are reinvested in maintaining or expanding existing Australian mines and in developing new operations, protecting existing jobs and creating new ones."