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What’s happening: Shares of Coca Cola Company edged lower on Monday, despite the release of upbeat results for the first quarter.
What happened: The beverage giant had announced several price hikes in the quarter to cover for rising costs due to elevated inflation levels.
Despite the price hikes, demand for Coca Cola’s sodas remained resilient, which propelled its results in the latest quarter.
How were the results: The Atlanta, Georgia-based company reported single-digit growth in sales for its first quarter, topping market estimates.
Why it matters: Several firms were forced to increase prices to pass on rising costs to customers, amid supply chain disruptions driven by the pandemic and the ongoing Russia-Ukraine war.
Since Coca Cola and PepsiCo dominate the global carbonated drinks market, they were able to hike prices without impacting demand for their products. Coca Cola’s average selling prices climbed 11% in the first quarter, and unit case volumes grew 3%. The easing of covid-19 restrictions also provided a boost to the company’s results.
However, Coca Cola’s operating margins shrank 180 basis points to 30.7%, with comparable operating margins expanding by 40 basis points to 31.8% in the quarter.
Management guided to organic revenue growth of 7%-8% for fiscal 2023, with comparable currency neutral earnings rising by 7%-9% and comparable earnings gaining 4%-5%.
How shares responded: Coca Cola’s shares rose earlier during the session following the release of quarterly results, but settled lower by 0.2% at $63.95 on Monday. The stock has added around 4% over the past month.
What to watch: Traders will keep an eye on inflation levels, which is expected to impact the company’s results in the current quarter. Markets also await earnings results from Coca-Cola’s major rival, PepsiCo, which is scheduled for today.
Context: The GBP/USD forex pair moved higher on Monday, with traders awaiting the Bank of England’s policy decision.
Details: The British pound has been one of the top-performing major currencies this year, gaining more than 20% versus the US dollar after dipping to a record low in September 2022.
Markets expect the UK central bank to continue tightening its monetary policy to combat inflation.
Data released last week showed consumer prices in the UK coming in at 10.1% for March, making it the only country in Western Europe with double-digit inflation.
The higher inflation fuelled speculations of the Bank of England raising interest rates higher than what was earlier expected. Economists project the BoE raising its benchmark interest rate by another quarter point to 4.5% on May 11.
Another rate hike would mark the Bank of England’s 12th straight increase since the UK central bank started to raise rates in December 2021.
The GBP/USD forex pair rose to 1.2485 on Monday, after jumping to its strongest level since June 2022 of 1.2545 on April 14. London stocks settled slightly lower, with the benchmark FTSE 100 declining 0.02% to close at 7,912.20.
What are expectations: Traders await data on public sector net borrowing, CBI industrial trends orders and CBI’s quarterly gauge of manufacturing optimism from the UK today. The UK public sector, which recorded a £15.86 billion deficit in February, is expected to report a deficit of £22.6 billion in March. Analysts expect the Confederation of British Industry survey’s total order book balance to improve to -16 in April, from -20 in March, while the CBI’s quarterly gauge of manufacturing optimism is projected to decline to -15 in the second quarter, from -5 in the first quarter.
Other Markets: US trading indices closed mixed on Monday, with Dow Jones index and S&P 500 up by 0.20% and 0.09%, respectively, and the Nasdaq 100 down by 0.24%.
Estonian Prime Minister Kaja Kallas said during her visit to Ukraine that she supports the country’s calls to join NATO. The safe-haven US dollar index fell slightly this morning.
Argentina’s economic activity estimator rose 0.2% year-over-year in February, slowing from 3.1% in the prior month, which exerted pressure on the ARS/USD forex pair.
The Dallas’ Fed manufacturing index fell to -23.4 in April, from -15.7 in the previous month, sending the Nasdaq 100 index lower on Monday.
Canada’s wholesale sales declined by 0.4% in March, following a 1.7% decline in February, which exerted pressure on the CAD/USD forex pair.
Chile’s producer prices decelerated by 1.9% in March, following a 1.6% decline in February. The news sent the CLP/USD pair lower in forex trading this morning.
South Africa’s leading business cycle indicator, Spain’s producer prices, Brazil’s FGV-IBRE consumer confidence index, current account, foreign direct investment and retail sales, Mexico’s economic activity, US Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, FHFA house price index, new home sales, Richmond Fed manufacturing index, Richmond Fed services index, Dallas Fed general business activity index, building permits, CB consumer confidence and API crude oil stocks, as well as Argentina’s retail sales.
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