US beverage giants escaped the first shock wave of what was inevitably dubbed ‘Black Monday’ by European commentators, 21 January, when the London Stock Exchange went into its steepest dive since 9/11. A few hours later, Asian markets experienced a similar slump.
The contagious loss of confidence was caused by investors’ fears of an approaching recession in the US. However, there was no initial reaction on Wall Street, for the good reason that American markets were closed that Monday while the nation celebrated Martin Luther King Jr Day.
When the New York Stock Exchange reopened on Tuesday, there was indeed a belated crash in share prices. But pre-emptive action by the Federal Reserve, which announced a massive interest rate cut to revive the US economy, appeared to slow the market decline.
Even so, the Dow Jones industrial average was 1.06% down at the end of the day, Nasdaq was 2.04% down, and Standard & Poor’s 500 index was 1.11% down. The biggest losers were software, airline, telecoms and utility stocks. Retail and bank stocks, on the other hand, fared relatively well.
The Coca-Cola Company and PepsiCo were on the losing side by varying margins. Coke’s shares fell 3.24% to $58.77, while the stock of major bottler Coca-Cola Enterprises was 3.28% down at $23.61. Pepsi shares meanwhile fell 2.9% to $69.39, but the Pepsi Bottling Group virtually held its ground, with the company’s stock slipping a mere 0.03% to $38.48.
Cadbury Schweppes’ American depositary receipts, which are listed on the New York exchange, even made a modest gain of 0.31% to $45.44. The curious explanation for this is that Cadbury’s main listing is in London, where the company’s stock had already slumped 3.63% on Black Monday, and was thus rising again (though only by 3.23%) as investors’ nerves steadied on Tuesday.
Sadly, few market analysts thought the Federal Reserve’s intervention would be sufficient to avert the threat of recession in the longer term. As this issue of beverage innovation went to press, the financial world was fastening its seatbelts in anticipation of a bumpy ride ahead.
© FoodBev Media Ltd 2020