After a week dominated by thoughts of interest rate hikes, which have given the pound a boost, Friday will see the focus shift to Britain’s move to leave the European Union, which could dent the recent recovery by the UK currency.
In Florence, UK prime minster Theresa May will deliver her first major Brexit speech since last January when she set out her original vision for Britain outside the EU.
With negotiations currently deadlocked over the so-called ‘Brexit bill’ and the role of the EU courts, the market is looking for a major policy intervention from May, particularly with the possibility of a looming cabinet revolt against the prime minister.
UK foreign Secretary Boris Johnson was this week accused of undermining his prime minister with a 4,000-word article about Brexit, although he subsequently denied reports he planned to resign if his blueprint was not followed.
With sterling hovering below the US$1.35 level after a rally up to pre-Brexit vote highs last week on Bank of England rate hike hints, Kathleen Brook at City Index thinks May’s “set piece in Florence will determine whether the pound finishes the week at US$1.37 or back towards US$1.32.”
Keeping up with the Smiths
Corporate news will be pretty thin, as is usual, on Friday, with just a handful of companies reporting.
Blue chip diversified industrials firm Smiths Group PLC (LON:SMIN) has generally reported good numbers in recent years as poor market conditions for its oil services focused John Crane business has been offset by better trading conditions for other divisions
In a preview, Graham Spooner, investment research analyst at The Share Centre said: “We should see that new products help the Medical devices division while continued strong housing and construction business in America will no doubt be reflected in the Flex-Tek division.
“Its Detection business should benefit from increased counter-terrorism measures and improved government budgets.”
Overall, the analyst concluded, Smiths Group should see a big boost from currency movements while there should be a steady rise in the dividend and an improvement in the dividend cover.
Not much of a Saga
Meanwhile, first-half results from over-50's travel and insurance specialist Saga PLC (LON:SAGA) are unlikely to provide too much excitement.
In a preview this week, analysts at Numis Securities said they expect Saga’s underlying first half pre-tax profit - before derivatives - to be broadly flat on the comparative period, mainly due to a non-recurrence of particularly strong reserve releases a year earlier.
The analysts said that Saga’s new strategic initiatives announced with the final results at the end of March this year “are still young and are therefore unlikely to impact these results.”
They added: “ Instead we expect the interim results to show a continuation of the key trends from last year. Specifically the main profit growth driver is likely to be the cruise and holidays segment. In contrast, headline performance of the insurance business is likely to be dampened by a reduction in reserve releases as per previous guidance.”
Significant events expected on Friday September 22:
Finals: Smiths Group PLC (LON:SMIN)
Interims: Saga PLC (LON:SAGA), Lamprell PLC (LON:LAM)
Economic data: CBI industrial trends survey