27 July

Susan Arthur

27 July

Good morning,
 

Today will be a marathon for market watchers. There’s a slew of company results, making it the busiest earnings day in twenty years – when according to Bloomberg data, European companies worth more than $3 trillion will be reporting results.

Consumer analysts will have a busy time of it, with numbers out from brewer Anheuser-Busch Inbev NV, Nestle SA, Diageo and Britvic, to name a few.
 
The industrial and banking sectors have Anglo American, British American Tobacco and Lloyds Banking Group announcing interims. Meanwhile Sky’s final results out this morning have seen it report a dip in full year profits prompted by a spike in the cost of broadcasting live Premier League football.  Bloomberg’s advice to analysts covering these sectors? Make yourself a double espresso to get through it.
 
With the focus on earnings, Home Secretary Amber Rudd must have decided it was a good time to communicate with the business community today.

Writing in the Financial Times, she has significantly softened the government’s tone on immigration. She urges companies to put forward a case for a liberal migration regime but underlines the need to balance this to achieve “sustainable” immigration. Employers will have up to three years of transition to adjust their recruitment practices after the UK leaves the EU. An independent Migration Advisory Committee will be established to study the needs of the British labour market.
 
While this is a move in the right direction, the committee is only due to report back in September 2019 – six months before the 2019 EU departure date. Whether the work will be in time to usefully influence government’s discussion on immigration is up for debate.

 

NEWS

National Grid has said that peak demand for electricity could increase by 50 per cent  if Britain shifts to using only electric vehicles. In a report, it indicated that 10,000 wind turbines or 10 nuclear power stations would need to be built to power these vehicles. At an average of 20 years build time for a nuclear power plan and six months per wind turbine, it’s stating the obvious that decisions on energy infrastructure need to be made now.

A forest fire in the French Riviera saw 12,000 people evacuated from the area yesterday.  British holidaymakers were amongst the more than 3,000 people who had to take shelter at a beach near the coastal resort of Saint-Tropez after a campsite was cleared overnight. Fires have affected the region for three days.

Specialists have warned that advice to patients to complete a full course of antibiotics even if they no longer feel ill is not backed up by evidence, and could be increasing drug resistance. Experts believe doctors should instead advise patients to stop taking medicine when they feel better.

 

BUSINESS AND ECONOMY

Glaxosmithkline CEO Emma Walmsley has outlined plans to refocus on four key areas of the business, cutting more than 30 development programmes and aiming to secure £1 billion of extra annual savings. Under the shake-up, the company’s core drugs business will become the central focus. The strategy was announced alongside second-quarter results, where the company reported a 12 per cent increase in revenue.

Airbus reported first half earnings for 2017 of 1.1bn euro, down 25 per cent from the same period last year. The group will cut production of its A380 planes to eight a year from 2019 as the aircraft have been impacted by engine issues. In 2015 the company was producing 27 of these types of plans. Commenting on the results, CEO Tom Enders indicated that the commercial aircraft environment remains healthy.

US crude stockpiles fell by 7.2m barrels for the week ending 21 July, at a rate higher than analysts expected, which prompted a rise in oil prices. Brent Crude oil traded 1 per cent higher at $50.71 a barrel yesterday.

 

MARKETS

What happened yesterday
ITV shares were the top gainers on the FTSE 100 yesterday after the market reacted positively to the company’s trading update, which boosted the index. ITV shares closed 2.2 per cent higher.
 
Additional strong numbers from catering firm Compass Group boosted the FTSE 100 yesterday. The group reported a 3.9 per cent rise in quarterly revenue, which it attributed to its strength in the US market. The share price closed up 1.53 per cent at 1, 623.41.
 
ONS GDP growth data showed that the economy expanded by 0.3 per cent. The number was in line with market expectations, with the pound moving very little in response.
 

Sterling edged up against the dollar to just under $1.3050.

Finals
Angle, Diageo, Renishaw, Skey, Torotrak

Interims
Anglo American, AstraZeneca, British American Tobacco, Burford Captial, Intu Properties, Just Eat, Lloyds Banking Group, St James' Place, Weir Group

Q2 results
AstraZeneca, Smith & Nephew

AGMs
Aquila Services Group, Record, Tate & Lyle

UK Economic Announcements
(11:00) CBI Distributive Trades Surveys

International Economic Announcements
(07:00) GFK Consumer Confidence (GER)
(09:00) M3 Money Supply (EU)
(13:30) Continuing Claims (US)
(13:30) Initial Jobless Claims (US)

 

 

COLUMNS OF NOTE

Writing in The Times, David Aaronovitch argues that it’s human nature to ignore evidence that contradicts your beliefs. Drawing on his own experience of having parents who were committed to the communist cause, he draws out the top excuses for ignoring evidence that counteracts what you believe, in order to make the point that Trump’s die-hard supporters are unlikely to change their minds.

Senior fellow at the Adam Smith Institute Tim Worstall writes on CapX that the decision to ban the sale of new diesel and petrol cars from 2040 goes against the advice of economists concerned about climate change. He argues that to focus solely on one solution limits the development and innovation of new, and potentially better, ideas, and that we should rather concentrate on promoting innovation.

 

DID YOU KNOW?

The last French cyclist to win the Tour de France was Benard Hinault, thirty-two years ago in 1985.

 

PARLIAMENTARY HIGHLIGHTS

TODAY

House of Commons

In recess until 5th September

House of Lords

In recess until 5th September

Scottish Parliament 

In recess until 5th September