Weak earnings a drag on FTSE

UK corporate earnings are not painting a pretty picture this morning, coming at a time when the spread of the coronavirus is already eroding the outlook for some companies.

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UK corporate earnings are not painting a pretty picture this morning, coming at a time when the spread of the coronavirus is already eroding the outlook for some companies. The FTSE is trading down almost 0.6% but home builders and utilities are providing some counterbalance.

BT is the most heavily sold stock after the telecoms firm reported a drop in third quarter revenue and warned that limiting the role of Huawei in Britain’s 5G expansion will increase the cost of its own gigabit plans by £500m .

Shell blamed a drop in the oil price in the last quarter on a 23% decline in its earnings and a far deeper plunge in net profits. Investors sold off the share in sync with rival BP in anticipation of a similar set of results from BP next Tuesday.

In a more normal situation in the markets BP would have been granted a little bit of respite given that oil prices have risen since the current reporting period, during the inflamed Iran-US tensions in early January. However, now that the coronavirus seems to have got its hooks into parts of China, the outlook for oil prices is beginning to deteriorate. Brent crude has dropped below the $58 mark and is unlikely to show any signs of recovery until China is free of the virus and back to being fully operational.

Pound slides ahead of BoE decision

The Bank of England is back in session today and for once the outcome is less than a given. In the lead up to this rate setting meeting four of the nine members indicated that it may be time to cut rates to help revive the UK’s slowing economy, but since then the UK’s economic indicators have started improving slightly, particularly in the housing market. The “what happens after Brexit” remains the big unknown and although investors seem to have less immediate concerns it is still not clear how Brexit  will play out for businesses over time. The pound is a touch lower against the dollar and losing more ground versus the euro.  

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