Amid the caterwauling and resignations that have accompanied Theresa May’s Brexit blue-print, the FTSE 100 has traded in a very narrow corridor, dogged by worries over the future of UK PLC ahead of Britain’s departure from the EU.
Already big investment decisions are being put on hold with jobs at risk – or at least that’s the narrative being fed to the media by the pro-remain business groups.
The reality would seem at odds with this particular scenario.
For while the UK economy may be growing at slightly slower pace than some of its European counterparts, it’s still on the up with GDP seemingly accelerating.
Next week we’ll get a better idea of just how Brexit is affecting the big corporates with no fewer than 15 Footsie firms and scores of second-tier companies updating shareholders.
They represent a broad cross-section of British business from mining to media through to drugs, drink and household goods.
Looking at the issues and themes, Brexit appears to be well down the list.
Here’s what we’ll learn from a bumper earnings week:
The weak pound has been a continued boon to British business
The weakness of the not so great British pound means a lot of our dollar-earning companies still have an edge over American rivals. Beneficiaries are likely to include Guinness-maker Diageo (LON:DGE), as well as drugs groups GlaxoSmithKline (LON:GSK) and AstraZeneca (LON:AZN).
The flipside of sterling’s weakness is that many UK companies are cheaper to international buyers than they have been in many years following the collapse of the pound from a five-year high of US$1.71 to just above US$1.30.
Given this, it’s not surprising to see two American companies – Comcast and Disney - vying for control of the satellite broadcaster Sky (LON:SKY). However, it should be pointed out the bids are all part of a bigger deal to take control of Rupert Murdoch’s 21st Century Fox.
Love Island: From ratings winner to money-spinner
According to analysts, the reality show could have a meaningful impact on ITV’s (LON:ITV) top and bottom line.
Next Wednesday we’ll get to see the financial impact of mass voyeurism when the media giant weighs in with its interim results. England’s unexpected journey to the semi-finals of the World Cup, as well as lifting a nation’s spirits, looks likely to have added a few million quid more in ad sales. The summer of 2018 could rate as a rare bright spot for a company challenged by the internet and the seemingly unstoppable growth of subscription giants Netflix and Amazon.
Misery at the pumps, means more money for the oil majors
A year ago, a barrel of Brent Crude Oil was changing hands for US$50. Today traders are paying in excess of US$70.
The knock-on effect has been an expensive one for motorists who are now paying around £1.30 for a litre of unleaded. If you are both extracting and selling the brown stuff (oil that is) then these are relatively benign times, where you’re not having to make your dividend payments from cash borrowed from the money markets. So, Royal Dutch Shell (LON:RDSA) should have a reasonably decent tale to tell when they update.
The UK property market is in a state of flux
Two second-line companies should provide us with an update on the health, or otherwise of the housing market – Rightmove (LON:RMV), owner of the property website of the same name, and estate agency chain Countrywide (LON:CWD). The biggest surge of sellers since 2011 slowed price rises, according to the last update from the former. One wonders how this will translate in terms of sales, profits and the outlook.
Beware the Brexit bears
Hundreds of annual reports have been filed in recent weeks, listing Brexit as the main risk factor. For many of them, particularly those with operations on the European mainland, the issue is a major long-term threat. But for a miner developing a project in the north-east of England, is it really a threat? The answer is a resounding no. Some of the risk statements posted to date smack of management getting excuses in early.
So, look twice at the Brexit-inspired profit warning that’s actually an excuse for management incompetence.