Trading for the week was mostly quiet in the absence of any significant economic data, domestic or international, until Friday.
The third quarter saw the US economy grow at an annualised rate of 2.8 per cent, comfortably beating consensus forecasts of only 2 per cent. Immediately markets panicked at the possibility of the Federal Reserve withdrawing the liquidity lifeline. In contrast the European Central Bank slashed the benchmark interest rate to 0.25 per cent in a bid to stave off a drop in inflation. These concerns weighted on the Australian market in early trade.
All up, for the week the market closed 11 points lower.
Commonwealth Bank of Australia
Commonwealth Bank has started the financial year in style, reporting cash earnings of $2.1 billion for the September quarter, coming in four per cent higher than the quarterly average for the first half of this year.
The quarterly numbers helped the banking sector rebound from losses on Monday after it was once again front-page news that regulator Australian Prudential Regulation Authority could set higher capital requirements, crimping banks’ ability to pay juicy dividends investors have become accustomed to.
Since reporting on Wednesday, Commonwealth Bank has gained 2.4 per cent.
On Monday Coca-Cola Amatil revised earnings down 5 per cent to 7 per cent for this financial year against last year’s numbers. The market was quick to respond to the third downgrade in six months, sending Coca-Cola Amatil 4.7 per cent lower.
The problems facing CCA come from lower prices realised selling into major supermarkets as price competition heats up with rival Asahi-owned Pepsi. Margin-hungry supermarkets are going to remain a problem for the beverage giant.
Beyond this, CCA has been pursuing a strategy of increasing prices as opposed to increasing volumes. As pricing is becoming more competitive, the strategy is proving to have limited power in the current environment.
Coca-Cola Amatil closed the week 6.9 per cent lower.
Department store retailer David Jones wasn’t able to keep the positive momentum achieved earlier in the week. Problems first emerged when it was disclosed two non-executive directors purchased David Jones shares days before the impressive sales numbers announced last Friday. Corporate governance concerns sent the stock down 1.6 per cent on Wednesday.
This wasn’t the end of the drama for David Jones. It was revealed on Thursday large shareholders are longing for current chief executive Paul Zahra to remain at the helm until David Jones has completed its strategic plans.
David Jones was able to dismiss the drama, finishing the week 4.1 per cent higher.