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Goldman Sachs misses profit expectations while revenue beats; stock slips
Topic of the day
Shares of Goldman Sachs Group Inc. (GS) slipped 0.5% in premarket trading Wednesday, after the investment and consumer bank reported a fourth-quarter profit that fell well short of expectations, while revenue beat. Net income fell to $1.72 billion, or $4.69 a share, from $2.32 billion, or $6.04 a share, in the year-earlier period, as operating expenses increased 42% as a result of "significantly higher" compensation and provisions for litigation and regulatory proceedings. The FactSet consensus for earnings per share was $5.47. Total revenue rose 23% to $9.96 billion, above the FactSet consensus of $8.55 billion, as net interest income rose 7.5% to $1.07 billion compared with expectations of a decline to $984.1 million. Investment banking revenue slipped 6% to $2.06 billion, global markets revenue rose 33% to $3.48 billion and consumer and wealth management revenue increased 8% to $1.41 billion. Within markets, fixed income, currency and commodities revenue rose 63% to $1.77 billion, above the FactSet consensus of $1.16 billion, while equities revenue grew 12% to $1.71 billion, but missed expectations of $1.75 billion. The stock has run up 19% over the past three months through Tuesday, while the Dow Jones Industrial Average has gained 7.1%.
The SMI closed up 0.1 percent on 10,671 points Wednesday, rising later in the day as Wall Street surged to new record highs. Trading was quiet before the signing of the US-China phase 1 trade agreement after European markets closed. Sources said the negotiating parties had reached agreement in a surprisingly large number of areas. But the US again threatened to increase tariffs on China if it fails to adhere to the terms of the agreement. US Trade Representative Robert Lighthizer said Tuesday the US does not feel obliged to lower existing punitive tariffs because of the partial agreement. The Swiss franc continued to rise despite Switzerland again being placed on a US watchlist of countries suspected of currency manipulation. The dollar fell to CHF 0.9637 from CHF 0.9710 Tuesday. Banks were at the rear of the index after Goldman Sachs and Bank of America released mixed 4Q 2019 financials. UBS fell 1.0 percent and Credit Suisse 1.9 percent. UBS will release 4Q 2019 figures Tuesday.
European stocks mostly fell as traders shrugged off any potential boost to sentiment from the impending rubber-stamping of a preliminary U.S.-China trade deal. The Stoxx Europe 600 fell a hair and the CAC-40 and DAX retreated 0.3% apiece, though the FTSE 100 rose 0.1% as sterling declined after weaker-than-expected U.K. December inflation data. "As Washington staffers dust off the fanciest pens and paper in preparation for the impending deal signing between Donald Trump and Chinese Vice Premier Liu He, the European markets were largely in a bad mood," Connor Campbell at Spreadex said. Meanwhile, oil majors take a hit as Brent and US light crude prices drop 0.9% after data showed higher US oil stockpiles. Total backtracks more than 1% and BP and Royal Dutch Shell swing in and out of the red. Vinci SA (+0,2%) said Wednesday that it will cut 40% of its emissions from direct operations by 2030 compared with 2018 levels as part of France's goal of reaching carbon neutrality by 2050. The French construction company said it would achieve the goal through hydrogen and biogas fuels, outfitting machinery with hybrid technology and revamping buildings to be more energy efficient, among other eco-friendly actions.
U.S. stocks rose to new highs as President Trump signed an initial trade pact with China, halting a two-year trade dispute between the world's two largest economies. The Dow Jones Industrial Average gained 0.5% in afternoon trading. The S&P 500 climbed 0.3%, while the Nasdaq Composite rose 0.3%. All three indexes hit intraday records. The trade pact was signed in a pomp-filled ceremony at the White House. As part of the deal, Washington suspended planned tariff increases on Chinese imports and cut the rate of some existing tariffs, while Beijing committed to ramp up purchases of U.S. goods and services by $200 billion over the next two years. The deal also included provisions to protect intellectual-property rights of U.S. companies in China, though it fell short of what the U.S. had wanted. A host of other difficult issues have been postponed to the next round of trade negotiations. Investors were also paying close attention to the first week of U.S. corporate earnings season. Strong earnings growth this year will help determine whether the stock market continues to rally. Bank of America shares fell 1.9% after the second-largest U.S. bank by assets said its profit dropped in the fourth quarter. U.S. Bancorp reported its smallest quarterly profit in two years, pushing its shares down 3.1%.
Asian shares were also mostly flat with Sydney's ASX 200 being the only major benchmark to rise significantly. Growth in China's new home prices cooled in December even as some local governments eased housing market curbs. Average new home prices in China's 70 largest cities rose 6.8% in December on year, compared with a 7.3% gain in November, according to National Bureau of Statistics data released Thursday.
On Tuesday, U.S. Treasury yields were pushed lower following subdued readings on U.S. consumer inflation and small-business sentiment which were followed up Wednesday with mixed economic data. The yield on the 10-year U.S. Treasury note fell 2.5 basis points to 1.792%, while the 2-year Treasury yield edged 1.4 basis points lower to 1.564%.
UBS rises the Commerzbank target to 5,70 (5,00) EUR – Neutral
UBS rises the Anglo American target to 2.000 (1.800) p – Sell
GS rises Safran to Buy (Neutral) - Ziel 169 EUR
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