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Blue chips still flat as investors ignore Woolworths' efforts to rejig customer loyalty program

Announcement posted by de2 Communications 22 Aug 2016

22 August 2016: SYDNEY -- Australian shares continue to consolidate above the 5500 level with the index heavy weights doing little to lift the market higher at the open of trade this week.

“Investors seem to be disregarding Woolworths’ (WOW) attempts to rejig their customer loyalty program, and the stock is trading relatively flat this morning,” said Gary Huxtable, private client adviser at Atlantic Pacific Securities.

“Bank stocks as well as Telstra are also flat,”

According to Huxtable, most of the action this morning has been in the outdoor advertising space.

“APN Outdoor (APO) downgraded its earnings following a lack of advertising demand, sighting an extended election campaign and the Olympics as catalysts,”

He added that due to APO’s large market share, the market has been surprised that recent industry figures indicating 18% growth year on year, has only translated to a 10% increase in revenue for APO.

Market reaction has quickly trickled down to other media shares.

According to Huxtable, “This has quickly been priced into fellow outdoor advertiser OOH! Media (OML). The price action we’ve seen this morning is a stark reminder of the downside risk involved by choosing to hold companies which are priced for perfection into earnings announcements.”

Outside of this space, materials and energy stocks are the laggards this morning, following softer commodity prices on Friday, with a stronger US dollar the main catalyst.

Huxtable pointed out that, “One exception is Woodside Petroleum which has become the pick of the energy plays recently,”

“Management’s decision earlier this year, to position itself for lower prices for longer using a $35 per barrel assumption has been well received by the market of late, and on a technical front, has recently confirmed a break of the two-year downtrend.”

Over the weekend, global markets were down on Friday following hawkish comments from the Federal Reserve officials, increasing the markets expectation of a US rate hike.

However, Huxtable pointed out that the market may be overlooking the fact that the Federal Open Market Committee (FOMC) has never raised interest rates within 2 months of a federal election before.

“Whilst history doesn’t necessarily repeat itself, it does rhyme, and as such the probabilities indicate that whilst Fed officials may continue to jawbone to increase sentiment towards the long term prospects of the US economy, they are unlikely to pull the trigger,” he said. 

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For more information, visit: http://www.apsec.com.au/