Daily Market Review – 24 December 2014
The Wall Street Journal recently reported that the Coca-Cola Co. (N:KO) plans to cut between a thousand to two thousand jobs globally within the next few weeks. The notices on these job-cuts will be handed to North American staff by the 8th of January while international employees will be advised by no later than the 15th of January. In October this year, Coca-Cola announced their $3 billion cost-cutting program and these new job cuts fall as part of this program. This cost-savings target of $3 billion by 2019 was raised by the company from the $1 billion it announced in February and the program was introduced after Cola posted a 14% decline in their third-quarter profit.
According to the Journal, over 10% of the corporate staff at Coca-Cola’s headquarters in Atlanta could be impacted and lose their jobs. Over 85% of Coke’s over 130,000 employees work in the company’s bottling and distribution divisions and the recent job cuts will not impact them for now. According to a Coke spokeswoman, employees have already been informed regarding the job cuts yet the company has not been specific regarding the number of employees that will be affected. Coke also commented that they are currently still working out how many employees will lose their jobs as opposed to those that might be permitted to apply for other positions available in the company.
The cost-cutting program also focuses on reducing costs in other areas of the company and as a result, Coca-Cola has cancelled their Christmas party this year. They have also asked their executives to rather use taxis as opposed to limousines for travel purposes. Meanwhile, Wintergreen Advisers, who are a minority shareholder of the Coca-Cola company, called on Muhtar Kent to be replaced. Kent is the Chief Executive of Coke and Wintergreen Advisers called him "incapable of leading Coke's turnaround". During late afternoon trading on the New York Stock Exchange, the shares of Coke were up 1.7% and trading at $42.97 per share.
On Tuesday, U.S. stocks broke record highs and the Dow Jones Industrial Average (DJIA) crossed over the 18,000 mark for the first time. When the markets opened, the Dow surged by 0.26%, or 46.11 points, to reach the psychologically important mark of 18,005.55. This advance came in response to positive data by the Commerce Department which showed that the U.S. GDP (Gross Domestic Product) had grown at a seasonally adjusted annual rate of 5% in the third quarter. Economists had speculated that the U.S. economy would only grow at a 4.3% annual pace in the last quarter and when the number beat analyst expectations, the Dow was pushed up into unchartered territory above the 18,000 mark. The best performers on the blue-chip index included the Coca-Cola Company (NYSE:KO) which advanced by 0.62 points or 1.46% to end at 42.97 while the poorest performer on the index were the shares of Pfizer Inc. (NYSE:PFE) which declined by 0.64 points or 1.99% to 31.45.
On Wednesday, trading volume is expected to be light and both the Nasdaq Stock Market and the New York Stock Exchange will close at 1 p.m. Eastern which is 3 hours earlier than normal closing hours. The markets in the United Kingdom and France will also close by 1 p.m.
On Tuesday, the euro (EUR) dropped to fresh two-year lows against the U.S. dollar (USD). During morning trade in the U.S., the EUR/USD currency pair traded at 1.2165 which marked the pair's lowest level since August 2012. The currency pair subsequently slid 0.44% and consolidated at 1.2175. This decline came in response to positive data out of the U.S. which showed that consumer sentiment in December had deteriorated less than analyst expectations and that the economy had grown at a faster pace in the third quarter than anticipated. Analysts expected the consumer sentiment index to fall to 93.1 in December yet in its report, the University of Michigan said that its index had only ticked down to 93.6 this month from a reading of 93.8 in November. The University also said that their inflation expectations for the next year dropped to 2.8% in December. In November, it was 2.9%. In other currency news, the EUR was higher against the British pound, with EUR/GBP advancing 0.15% to 0.7856. In the United Kingdom on Tuesday, the Office for National Statistics said that the current account deficit widened to £27.0 billion in the third quarter. This was up from £24.3 billion in the second quarter, after being revised from an estimated deficit of £23.1 billion. In another report, data showed that the U.K. gross domestic product (GDP) rose 0.7% in the third quarter. This number was in line with expectations.
On Tuesday, natural gas futures dropped to nearly two-year lows. This decline came after the futures dropped over 9% in the previous session. These declines have been prompted by winter weather which has been milder than expected and as a result, rising supplies have continued to weigh. During U.S. morning trade on the New York Mercantile Exchange, natural gas futures for delivery in January were at $3.113 per million British thermal units, down 1.03%. This marked the lowest level since January 2013.
The broad selling pressure of this commodity has increased immensely as the warm weather throughout December, which is uncharacteristic for this time of year, has allowed stockpiles to increase to where they were last year. On the upside though, recent weather forecasts have indicated that temperatures in the mid-Atlantic, Great Lakes and Midwest regions will drop from the 27th of December and should continue well into February. According to the U.S. Energy Information Administration (EIA) which is the statistical arm of the energy Department, over 49% of households in the U.S. use gas for heating.