Tuesday preview: Johnson set to be named PM; Beazley and Fevertree results due
Politics will be the main focus on Tuesday, with Boris Johnson set to be announced as the next Prime Minister.
His expected appointment has already sparked the resignation of Foreign Office minister Alan Duncan, while Chancellor Philip Hammond and Justice Secretary David Gauke have both said they will resign if Johnson gets the top job.
"Boris’s intention to deliver Brexit by the 31st October deadline even if that means leaving without a deal is proving very divisive and will likely mean that he will fill the new cabinet with yes-men who are hard Brexiteers," said David Cheetham, chief market analyst at XTB.
"It would come as a huge surprise for the markets if Boris Johnson isn’t the winner of the contest and while his more hardline approach to Brexit is seen as less constructive for the pound, there’s already been quite a lot of bad news baked in."
Oanda analyst Craig Erlam said that being a Brexiteer that actively campaigned for it in 2016 immediately puts Johnson at an advantage with getting a deal through Parliament but doesn't necessarily make his visits to Brussels any easier, nor will it help him get the country out by the end of October as he's repeatedly promised.
"Traders haven't particularly warmed to his no-deal talk, shockingly, but with the pound now languishing near more than two-year lows, I wonder whether the worst may be priced in for now," Erlam said. "The currency may have earned some reprieve after slipping more than 6% since it became clear that May was not going to get her deal through Parliament. With traders' minds once again focused on Brexit negotiations, it could be another volatile period for sterling."
On the corporate front, Beazley's first-half results are due. UBS said it expects a mixed quarter, characterised by strong investment returns and relatively weak underwriting performance.
"Whilst there were no major catastrophe losses in the period, there appears to be an elevated level of attritional losses. We also note some 2018 losses have crept higher, which could weigh on reserve releases."
Posh mixers maker Fevertree is also slated to post its first-half numbers. David Madden at CMC Markets said 2018 turned out to be another successful year for the company, which in the space of four years has become one of the UK’s leading exporters and producers of carbonated mixers.
However, it highlighted sector peer AG Barr’s profit warning last week, which has spooked investors.
"This week’s first-half update from Fevertree could well prompt further investor uncertainty, with particular attention likely to be focused on its profit margins, which did show a small decline at the end of last year, from 53.5% to 51.8%. The guidance will also be of interest with full year revenue expectations currently expected to come in at £279.6m, an increase of 17.8% on 2018," he said.
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