By Swissquote Analysts
Goldman Sachs Europe Fined $7.2M for Risk Calculation Errors
Topic of the day
The European Central Bank on Monday fined the European unit of Goldman Sachs 6.6 million euros, or around $7.2 million, for credit-risk reporting errors. The bank under-reported the credit risk associated with its risk-weighted assets for eight straight quarters between 2019 and 2021, the ECB said. The error was the result of Goldman Sachs Europe misclassifying corporate exposures and applying a lower risk weight. The bank didn't detect the mistake in a timely manner because of deficiencies in its internal controls, the ECB added. Banks calculate their capital needs based on their risk-weighted assets, which measure their credit risk, market risk and operational risk. Underestimating risk-weighted assets means the bank did not calculate its capital needs properly and reported higher capital ratios than it should have done, the ECB said. The capital ratios that banks report give regulators, investors and customers a handle on their capital strength and ability to absorb losses. The Goldman unit was well above its capital requirements in the period, according to its filings. The ECB said the breach rated as "severe" in its array of administrative penalties, the midpoint of a range from minor to extremely severe.
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The Switzerland stock market ended slightly up on Monday, giving up most of its gains in the final hour of the day's session. Activity was largely stock specific with investors reacting to quarterly earnings updates released by companies in recent days. The benchmark SMI, which opened on a firm note, climbed to 11,616.37 about an hour past noon, and finally ended the session with a small gai of 13.52 points or 0.12% at 11,578.25. Lonza Group surged 1.71% and Swiss Life Holding gained 1.13%. Zurich Insurance Group, Swisscom, Richemont and Alcon gained 0.5 to 0.75%. Partners Group, Sonova, Swiss Re, Credit Suisse and Roche Holding ended weak. In the Mid Price Index, Bachem Holding climbed nearly 3%. Swiss Prime Site gained about 2%. Temenos Group surged 1.82%, while Swatch Group, Baloise Holding and PSP Swiss Property gained 1.3 to 1.5%. Barry Callebaut, Ems Chemie Holding, Belimo Holding, Schindler Holding, Clariant and Helvetia posted moderate gains. SIG Combibloc drifted down more than 3%. Flughafen Zurich ended lower by 1.06%, and AMS ended 0.72% down. In economic news, data from the Federal Statistical Office showed Switzerland's producer and import price inflation eased further in April to the lowest level in the current sequence of growth.
European stocks closed mixed on Monday with investors digesting the latest batch of economic data from the region and weighing the outlook for the global economy in general and the European economy in particular. The pan European Stoxx 600 gained 0.25%. The U.K.'s FTSE 100 climbed 0.3%. Germany's DAX and France's CAC 40 edged up 0.02% and 0.05%, respectively, while Switzerland's SMI ended 0.12% up. Among other markets in Europe, Belgium, Finland, Ireland, Netherlands, Norway, Portugal, Russia and Sweden ended higher. Czech Republic, Denmark, Iceland, Spain and Turkiye closed weak, while Austria, Greece and Poland ended flat. In the UK market, TUI rallied 3%. 3i, Centrica, Carnival, Segro and Polymetal International gained 2 to 2.6%. HSBC Holdings, Anglo American Plc, Flutter Entertainment, Whitbread, Antofagasta, Lloyds Banking, BHP, Natwest Group, Prudential, Mondi and Glencore gained 1.3 to 2%. Rolls-Royce Holdings dropped more than 2%. DCC, Tesco and BAE Systems also ended notably lower. In Paris, Alstom climbed more than 5%. AXA surged 2.5%. Kering, Saint Gobain, Societe Generale, Unibail Rodamco, Teleperformance and Eurofins Scientific posted moderate gains. In the German market, Siemens Energy gained about 2.5% after adjusting its outlook for fiscal year 2023. Henkel rallied 2.3%. Siemens Healthineers, Vonovia, HeidelbergCement, BASF, Deutsche Bank and Covestro gained 1 to 2%. Zalando, Deutsche Boerse, Sartorius, Infineon, Puma, Bayer and SAP lost 0.8 to 1.4%. On the economic front, eurozone industrial production declined at the fastest pace in nearly one-and-and-a-half years in March, largely led by a slump in the capital goods output, and suggested that a downward revision to the first quarter economic growth was likely.
U.S. stocks edged higher Monday as investors monitored debt-ceiling negotiations, coming off two consecutive losing weeks for the S&P 500. The S&P 500 added 0.3%. The Dow Jones Industrial Average ticked up 0.1%, or nearly 50 points. The tech-heavy Nasdaq Composite rose 0.7%. The major indexes wobbled between small gains and losses throughout Monday's session as the U.S. faces a potentially economy-shaking default. The Treasury Department and Congressional Budget Office have warned that the U.S. could become unable to pay its bills as soon as June if Congress doesn't first raise the federal borrowing limit. Treasury Secretary Janet Yellen said over the weekend that negotiations over raising the debt ceiling were making progress and could result in a deal. Still, Republicans and Democrats remain at a standoff as a possible default edges closer. A second meeting with President Biden and congressional leaders that was originally set to take place Friday was postponed until early this week. Shares of regional lenders have been volatile since the banking turmoil that erupted in March. PacWest shares jumped 18%, while Western Alliance added 12% and Zions rose 8.5%. The SPDR S&P Regional Banking exchange-traded fund edged up about 3%. Elsewhere, shares of Activision Blizzard rose 1.2% Monday after the European Union's antitrust watchdog approved the company's planned merger with Microsoft. Shake Shack shares jumped 7.8%.
The majority of the stock markets in East Asia and Australia showed slight gains on Tuesday, with the stock exchange in Japan recording more significant gains. On the Tokyo stock exchange, the Nikkei index rose by 0.8 per cent. Investors' concerns about tighter central bank monetary policy and lower corporate earnings have eased somewhat after the reporting season, market sources said. Shares in T&D Holdings are up 4.3 per cent after the insurance company announced a share buyback programme and results for the financial year.
The benchmark 10-year U.S. Treasury yield edged higher to 3.506%, from 3.461% on Friday.
Citi raises Richemont to CHF 180.50 (169) – Buy
Citi lowers Fraport to EUR 60 (61) – Buy
Societe Generale raises the Henkel target to EUR 86 (77)/Buy – Trader
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