Weekly stock market review: 21 – 25 July

Australian chief executive Rod Eddington, who used to run Cathay Pacific and Ansett Australia, was supposed to be a much safer pair of hands in the industrial relations department than his predecessor Bob Ayling, who was almost universally loathed by the airline’s staff. The latest flare-up has shattered that illusion, and will likely be seized upon by the (largely non-unionised) low cost carriers who have stolen much of BA’s short-haul business.


Sainsbury’s was full of contrition this week for its poor first-half trading performance. ‘Like-for-like’ sales were up only slightly, and stripping out the effect of petrol sales and food price inflation, they actually fell. This is disappointing for two reasons; first, because the company’s main rivals all managed to increase sales, and second, because Sainsbury’s has spent fortunes trying to revive itself.

Analysts are increasingly worried that the company will never see a return on the hundreds of millions of pounds it has spent on store refits, new product ranges and Jamie Oliver commercials. So are we: we recommended selling the shares last year at 317p, and the same advice stands at their current 265p.

Drugs giants GlaxoSmithKline and AstraZeneca both reported interim results this week. They were notable not so much for the numbers, but for the ‘guidance’ that came with them. AstraZeneca, for instance, said full-year earnings could be as high as $1.75 a share, up from an earlier forecast of $1.50. The upbeat tone struck by the companies is a pleasant surprise; at the start of the year, many were predicting that the competitive threat posed by ‘generics’ would erode profits at pharmaceutical firms. Generics are copy medicines made once a product’s patent protection expires, and sold for a fraction of the price of the original.

The mainstream press has been full of soothing noises about the housing market this week. Don’t believe it: almost all the supposed reassurance comes from companies or associations which have some vested financial interest in the system. But Inland Revenue figures out this week show the number of actual property transactions continues to plummet. Just 290,000 houses changed hands in the past three months, the lowest number for seven years. This reduced activity, caused by first-time buyers being priced out of the market, will eventually result in lower prices. It’s just a question of when. We reckon that within a year, prices will be falling noticeably in most regions.

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