Goldman shares hit record high on Q2 profit

Today’s headlines

What’s happening: Shares of Goldman Sachs Group rose sharply on Tuesday following the release of its second-quarter results.

What happened: The investment bank posted stronger-than-expected revenues and earnings for the latest quarter.

Goldman Sachs also boosted its quarterly dividend from $4.50 per share to $5.00 per share, sending the stock to an all-time high.

How were the results: The New York-based bank reported double-digit sales growth for the three months ended June 30.

• Net revenues grew 39% year-over-year to $20.34 billion, topping consensus estimates of $16.13 billion, amid a surge in the Global Banking & Markets business.
• Earnings came in at $20.98 per share, significantly higher than Wall Street expectations of $14.40 per share.

Why it matters: The bank topped market estimates as dealmaking activity rose during the quarter, while market volatility due to the US-Iran war sent equity trading to record levels.

Concerns around higher inflation and interest rates also sparked significant market volatility, resulting in higher revenues from equity trading.

The bank’s equities business recorded revenues of $7.42 billion, up 72% year-over-year, while revenues from the fixed income, currency and commodities business grew 32% to $4.59 billion during the recent quarter. The bank’s asset and wealth management revenues surged 20% to $4.60 billion.

Goldman Sachs retained its position as the top merger and acquisition advisor, announcing $1 trillion in deal volumes during the first half of the year. Its investment banking fees jumped 55% to $3.4 billion during the quarter.

The bank raised its quarterly dividend by 25% to $5 per share and repurchased $4 billion worth of stock.

Peers JPMorgan and Bank of America also posted higher profits for the second quarter.

How shares responded: Goldman Sachs’ shares jumped 9% to close at $1,140.00 on Tuesday following the release of quarterly results. The stock has surged around 25% year to date.

What to watch: Investors will keep an eye on results from other major Wall Street banks to look for further insights into the economy’s outlook.

The markets today

The Japanese yen in focus today ahead of some major economic reports

Context: The Japanese yen gained against the US dollar this morning as investors responded to the latest economic data.

Details: Data released this morning showed that Japan’s Reuters Tankan index for manufacturers came in unchanged from the previous month at +13 in July, after surging during the previous two months, amid strong semiconductor demand.

Japan’s core machinery orders dipped 12.4% to ¥962.0 billion in May, following 8.7% growth in the previous month. The figure was also worse than market estimates of a 4.2% decline. Machinery orders recorded the third monthly contraction so far this year, logging the steepest decline since December 2019 and signalling weakness in business investment.

Investors also monitored geopolitical concerns after US President Donald Trump threatened further strikes on Iran, while reinstating the naval blockade. Trump did abandon his proposed toll on vessels passing through the Strait of Hormuz, which provided some support to overall market sentiment.

Weakness in the US dollar lent support to the Japanese currency. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 100.80 this morning.

The USD/JPY forex pair lost around 0.1% to reach 162.09, while Nikkei 225 gained 0.9% to trade at 68,353.91 this morning.

What to watch: Investors will keep an eye on tensions between the US and Iran.

Data on foreign bond investment (0350 UAE Time) and stock investment by foreigners (0350 UAE Time) from Japan will be released today. Japanese investors sold net foreign bonds worth ¥218.1 billion during the week ending July 4, compared to ¥277.5 billion in the prior week. Foreign investors sold net Japanese equities of ¥22.2 billion during the week ending July 4, compared to ¥1,817.5 billion in the prior week.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.02%, 0.38% and 1.10%, respectively.

The news shaping the markets

Russia accused Ukraine of terrorism after drones hit Russian vessels in the Sea of Azov. The news sent the USD/RUB pair lower in forex trading this morning.

New Zealand’s electronic card transactions fell 1.4% in June. This being better than the previous month’s 1.6% decline lent support to the NZD/USD forex pair.

China’s industrial production grew 5.3% year-over-year in June, accelerating from 4.5% growth in the previous month. The latest reading topping market expectations of 4.6% sent the USD/CNY pair lower in forex trading this morning.

Argentina’s consumer price index climbed by 1.9% in June, slowing from 2.1% in May, which exerted slight pressure on the USD/ARS forex pair.

South Korea’s unemployment rate declined to 2.7% in June from 2.8% in May, while the economy added 63,000 jobs during the period. However, the USD/KRW pair rose in forex trading this morning.

What else to watch today

Eurozone’s industrial production (1300 UAE Time), India’s unemployment rate (1430 UAE Time), US MBA mortgage applications (1500 UAE Time), Canada’s capacity utilisation (1630 UAE Time), manufacturing sales (1630 UAE Time), new motor vehicle sales (1630 UAE Time), wholesale sales (1630 UAE Time), Bank of Canada’s interest rate decision (1745 UAE Time) and BoC press conference (1830 UAE Time) as well as US PPI (1630 UAE Time), NY Empire State manufacturing index (1630 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time) and Fed Beige book (2200 UAE Time).