The FTSE 100 is up almost a full percentage point today due to strong earnings results from some of its main constituents. There was relatively little in the way of political news today to move the needle; for now, all eyes are on EU leaders who are deciding whether to grant the UK a three-month extension to the Brexit process on Friday. The move is broadly supported by almost all member states, with the exception of France, which has been more reticent.
For his part, Prime Minister Boris Johnson has stated that he does not want an extension, and that his government plans to leave on 31 October, “with or without a deal“. Whether or not the government is legally empowered to do this seems unclear.
He has also pledged to call for a snap election if an extension is granted, although this would require a two-thirds supermajority vote by Parliament, so even this is not guaranteed.
AstraZeneca
Shares of AstraZeneca (LSE: AZN) are up more than 4.5% on the day in response to a very positive trading update. The pharmaceutical giant reported third-quarter revenue growth of 18% compared with the same period in the previous year, as well as an improvement in core operating margin. Astra maintained its annual earnings per share guidance range of $3.50–$3.70 (£2.72–£2.88), reflecting the decision to reinvest these unexpected gains back into research and development.
As we have written previously, Astra is in the middle of a multi-year grand transformation that has seen it pivot towards cancer treatments. Today, oncology accounts for 37% of total sales – a 50% increase year on year.
The trading update also underscored the importance of emerging markets to Astra, with the segment showing sales growth of 19%. Emerging markets now account for 35% of Astra’s total product sales.
Royal Bank of Scotland
By contrast, shareholders of Royal Bank of Scotland (LSE: RBS) received some bad news today, with the bank reporting a third-quarter loss due to a £900m charge related to the mis-selling of payment protection insurance (PPI). The stock is down around 2.5% on the day in response to the trading update.
RBS’s total before-tax operating loss was £8m, meaning that the PPI charge wiped out a sizeable profit. Management stressed that their outlook for 2019 and 2020 remains unchanged, suggesting that investors might want to brush off this one-time setback.
On the other hand, banks are cyclical businesses, and the UK financial sector is currently in the midst of a troubling environment, with low interest rates, Brexit uncertainty, and a potentially hostile Labour government that could gain power if an election is called.
Woodford Patient Capital
Shares of beleaguered investment firm Woodford Patient Capital are up almost 25% today on news that asset manager Schroders has been appointed as the fund’s new manager, raising investor hopes that their capital will be returned relatively quickly.
