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Goldman Sachs announces results and restructuring

 

Wednesday, October 19, 2022

The news shaping the markets today

Russia’s military forces have been pushed back by the Ukrainian offensive, with Moscow’s new commander admitting that the situation in the Kherson region had become “very difficult.” The US dollar index traded slightly lower on the news.


Australia’s Westpac-Melbourne Institute Leading Economic Index came in unchanged at -0.2% in September, lending some support to the AUD/USD forex pair.


The US NAHB housing market index declined for the 10th consecutive month to a reading of 38 in October, missing the consensus estimate of 43. However, the Dow Jones index jumped more than 300 points on Tuesday.


Colombia’s economy grew by 8.6% year-over-year in August, versus a 6.4% expansion in the previous month. However, the latest reading missed market expectations of 7.5% growth, sending the COP/USD pair lower in forex trading this morning.


US crude inventories fell by 1.3 million barrels in the week ended October 14, versus market estimates of an increase of 1.6 million barrels, the American Petroleum Institute said. US crude oil futures traded higher on the news.

 

What’s happening: Shares of Goldman Sachs Group rose on Tuesday, after the bank reported results for its third quarter.

What happened: Goldman Sachs posted upbeat sales and profits for the quarter, amid strong trading.

However, revenues at one of the bank’s major segments fell short of market expectations. Management also made some big announcements.

How were the results: The New York-based bank reported a decline in sales and profits for the third quarter, but both the metrics still topped market views.

  • Revenues fell 12% to $11.98 billion but still exceeded the consensus estimate by more than $500 million.
  • Profits contracted by 43% to $3.07 billion, or $8.25 per share, which came in ahead of market expectations of $7.69 per share.

Why it matters: The quarterly results from Goldman Sachs were consistent with those announced by its major peers. Big banks, including JPMorgan Chase and Morgan Stanley, reported a sharp decline in investment banking revenues, but strong fixed-income results that provided a boost to their overall results.

Goldman Sachs said fixed-income traders brought in revenues of $3.53 billion, a 41% surge from the year-ago quarter, while equity traders generated $2.68 billion in revenues, a 14% year-over-year decline, although this topped estimates of $2.59 billion.

The strong results in the trading segment offset the weak performance of the investment banking segment, where revenues fell 57% to $1.58 billion and came in short of market views of $1.84 billion.

The bank’s other segments also posted upbeat quarterly results. However, asset management revenues contracted by 20% to $1.82 billion, although this too topped market views of $1.65 billion. Revenues from consumer & wealth management climbed 18% to $2.38 billion, surpassing the consensus estimate of $2.19 billion, driven by an increase in credit card balances and interest rates.

Goldman Sachs also declared a dividend of $2.50 per share and disclosed plans to restructure four of its business segments into three separate divisions. The bank’s new operating segments will now include asset & wealth management, global banking & markets, and platform solutions.

How shares responded: Shares of Goldman Sachs gained 2.3% to close at $313.85 on Tuesday, following the release of quarterly results. The stock has lost around 21% year to date.

What to watch: Investors will continue monitoring the bank’s restructuring process, as the changes are scheduled to take effect in December. Markets will also keep an eye on the US Fed, with further interest rate hikes expected to support banking earnings.

The markets today

European stocks will be in focus today ahead of a basket of economic reports

Context: European markets settled higher on Tuesday as traders monitored UK’s U-turn on its fiscal plan.

Details: European markets extended gains for the fourth day on Tuesday as investors cheered the UK government’s decision to halt the fiscal plan announced earlier.

The STOXX Europe 600 index gained 0.34% to close at 399.84 on Tuesday, with all major bourses recording gains in the session. Construction stocks were among the top performers, while energy and basic resources stocks recorded losses.

The GBP/USD forex pair moved lower, after recording sharp gains in the previous session after the new British Finance Minister Jeremy Hunt scrapped most of the fiscal policies announced by Prime Minister Liz Truss’s government.

On the economic data front, the Eurozone’s ZEW indicator of economic sentiment rose to -59.7 in October, from -60.7 in September, while the German ZEW indicator of economic sentiment improved to -59.2 in October, from the prior month’s reading of -61.9.

Shares of Publicis Groupe gained over 2% on Tuesday, after the advertising group raised its forecast for the full year, after recording upbeat organic revenue growth for the third quarter.

France’s CAC 40 index gained 0.44% to close at more than a four-week high of 6,067.00, also recording gains for the fourth session. Germany’s DAX added 0.92% to 12,765.61 in the session.

London’s stocks closed higher on Tuesday, with the benchmark FTSE 100 rising 0.24% to 6,936.74.

What to watch: Traders await the release of economic reports on construction output, inflation rate and consumer price index from the Eurozone today. Construction output in the region had grown by 1.5% year-over-year in July and is expected to rise by 0.5% in August. Analysts expect Eurozone’s annual inflation rate to accelerate to 10% in September, from 9.1% in the previous month.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.12%, 1.14% and 0.77%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 0.9856 and 0.9861 Positive
USD/CHF – 0.9938 and 0.9944 Positive
Gold – 1655.95 and 1657.40 Positive
WTI Crude Oil  – 83.18 and 83.32 Negative
Nikkei 225 – 27324.50 and 27355.50 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9856, -0.04%) Dow ($30,743, 0.55%) Brent ($90.75, 0.8%)
GBP/USD (1.1339, 0.15%) S&P500 ($3,763, 0.81%) WTI ($84.03, 1.5%)
USD/JPY (149.17, -0.04%) Nasdaq ($11,337, 1.23%) Gold ($1,655, -0.1%)

What else to watch today

UK’s inflation rate, retail price index, producer price inflation and input producer prices, Indonesia’s loan growth, South Africa’s inflation rate and retail sales, US MBA mortgage applications, building permits, housing starts, gasoline stocks, crude oil inventories, distillate stockpiles and Fed Beige book, Canada’s inflation rate, producer price inflation and raw materials price index, as well as Russia’s producer prices.


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