Goldman Sachs Profit Rises on Deal Bonanza
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Goldman Sachs Group Inc. on Friday reported a 60% jump in profit and a 26% increase in revenue, beating analysts’ expectations. The Wall Street titan rounded out earnings season for the biggest U.S. banks, all of which reported double-digit profit gains. Goldman’s investment bankers brought in $3.7 billion in fees, the second-best quarter on record and 88% higher than a year ago. They earned $1.65 billion just from advising on mergers and acquisitions, a quarterly record and more than triple the year-ago results. Third-quarter trading revenue jumped 23% at Goldman, to $5.61 billion. Bond trading came back to earth after a supercharged 2020, when nervous companies raced to raise debt. Now, investors are trying to determine the new normal of trading activity. Bond-trading revenue was flat at Goldman and down at the other big banks. For all its Wall Street prowess, Goldman is trying to expand on Main Street. Revenue in the consumer and wealth-management division rose 35% to $2.02 billion, or about 15% of the firm’s third-quarter revenue. The unit includes Goldman’s Marcus consumer bank and the team serving wealthy clients. Overall, Goldman reported profit of $5.38 billion, or $14.93 a share. Shares of Goldman Sachs Group jumped $14.87, or 3.8%, to $406.07. Shares hit a record of $419.69 in August and are up about 50% for the year. Chinese regulators approved Goldman Sachs Group Inc.’s application to take full ownership of its local securities business, another step in China’s gradual opening of its financial system to major players from the U.S. and elsewhere.
The Swiss stock market ended the week on a positive note. The SMI gained 0.6 per cent to 11,961 points. Among the 20 SMI stocks, there were 16 price gainers and 4 price losers. 34.81 (previously: 29.58) million shares were traded. After the good run on the previous day, financial stocks were again in demand. Fundamental support came from the steepening of the yield curve, which promises better returns. Credit Suisse shares rose by 1.9 per cent, UBS improved by 0.6 per cent. Among insurance stocks, Swisse Re (+1.1%), Swiss Life (+1.2%) and Zurich Insurance (+0.4%) scored. Richemont (+1.2%) was again at the top of the SMI. The luxury stock continued to benefit from the good business figures presented by its French competitor LVMH during the week. Meanwhile, the shares of competitor Swatch were only able to gain 0.3 per cent. Among the index heavyweights, Nestle posted gains of 0.3 per cent. Pharmaceutical giants Roche and Novartis advanced 0.9 and 0.6 per cent respectively. Bringing up the rear were SGS (-0.5 per cent) and Givaudan (-0.1 per cent).
European shares posted modest gains Friday, supported by travel, energy and bank stocks. The Stoxx Europe 600 index rose 0.7% to 469.4 points. In Paris, the CAC 40 and SBF 120 advanced 0.6% each. In Frankfurt, the DAX gained 0.8% and the FTSE 100 in London climbed 0.4%. For the week as a whole, the Stoxx Europe 600 appreciated by 2.7%. Airlines benefited from the Biden administration's confirmation that US borders will soon be reopened to vaccinated travellers. This announcement boosted stocks in the sector, including Air France-KLM (+4.6%), Lufthansa (+4.2% in Frankfurt) and IAG (+3.2% in London), as well as American Airlines (+2.2%) and Delta Air Lines (+1%). ADP Group (+2.2%) saw its traffic increase by 8.7 million passengers in September compared to the same month in 2020. DBV Technologies jumped 9.7% as investors seemed to anticipate positive announcements from the company. Renault's sales (+3.5%) fell slightly less than the market in September in the European Union (EU). Over the period, Volkswagen (+1.3% in Frankfurt) registrations dropped by 28% in the EU, while Stellantis (+1% in Paris) plunged by 30%. Oil and mining stocks were further supported by rising commodity prices. Vallourec increased by 6.7%, while Eramet gained 6%. Rio Tinto (-1.4% in London) lowered its production and raw material delivery forecasts this year, particularly for iron ore, due to labour shortages and disruptions at its plants. Hugo Boss stock rose 1.1% afer it raised its 2021 targets following strong third-quarter results, which included above-forecast sales and earnings that also topped pre-pandemic levels. Shares in OVHcloud climbed 6.8% on their first day of trading on the Paris Euronext exchange. The French cloud-services provider had priced its IPO at 18.50 a share, the lower end of a previously-set indicative range of 18.50-20. Pearson shares fell 14.9% after the FTSE 100 education company said it was on target to meet the consensus 2021 operating profit forecast, but investors soured on its earnings, which showed higher-education sales declined even as total sales grew.
U.S. stocks rose Friday, notching their biggest weekly gains in months following a strong streak of earnings reports. Stocks began the week with losses, but turned higher after companies ranging from banks to insurers delivered robust results for the latest quarter. Economic data also helped reassure investors about the growth outlook. Data Friday showed retail sales unexpectedly rose in September, despite economists’ worries about the Delta variant of Covid-19 and the end of enhanced unemployment benefits. The S&P 500 added 33.11 points, or 0.7%, to 4471.37 and jumped 1.8% for the week, posting its best weekly performance since July. The Dow Jones Industrial Average gained 382.20 points, or 1.1%, to 35294.76 and advanced 1.6% for the week, delivering its biggest weekly gain since June. The technology-focused Nasdaq Composite ticked up 73.91 points, or 0.5%, to 14897.34 and climbed 2.2% for the week. Bank stocks helped lead the market higher Friday. Meanwhile, logistics company J.B. Hunt Transport Services rose $15.31, or 8.7%, to $190.55 after reporting a rise in third-quarter profits. Shares of Alcoa climbed $7.40, or 15%, to $56.00 after the metals producer posted higher third-quarter sales Thursday, boosted by higher aluminum prices. Moderna slipped $7.67, or 2.3%, to $324.21 after The Wall Street Journal reported the Food and Drug Administration is delaying a decision on authorizing the company’s Covid-19 vaccine for adolescents while it assesses the risk of a rare inflammatory heart condition. While earnings this season have largely impressed investors so far, many say they remain cautious about the market’s outlook, citing fears that supply-chain blockages and a steep rise in energy prices will fuel more inflationary pressures. That in turn could push central banks to withdraw stimulus at a faster pace than currently forecast.
In Asia, benchmarks in Japan, Hong Kong and China all fell following data that showed China's economic growth slowed sharply in the third quarter to 4.9%. The stock exchange in Shanghai on the Chinese mainland is down 0.3 per cent. In Hong Kong, the Hang Seng Index loses 0.3 per cent. There is only a slight decline in Tokyo, where the Nikkei index is 0.3 per cent lower. The continued weakness of the yen, which is benefiting export-oriented stocks in particular, is providing some support. On Friday, the dollar rose above the 114 yen mark for the first time since November 2018. The Kospi in Seoul declined by 0.2 per cent.
Long-dated U.S. Treasury yields rose Friday, trimming a weekly decline, as a closely watched market-based measure of inflation expectations hit a more-than-16-year high and September retail sales came in stronger than expected. The 10-year Treasury note rose to 1.574% Friday, from 1.519% Thursday. For the week, the benchmark yield fell 3 basis points, its first such fall in seven weeks.
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