FirstFT: Wall Street competitors diverge

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good morning. Investors’ reactions were significantly different yesterday to the results of two of the largest banks on Wall Street.

Goldman Sachs and Morgan Stanley both reported that net profits fell in the fourth quarter of 2022 and that investment banking fees fell nearly 50 percent, amid a paucity of mergers and new stock market listings.

But investors welcomed Morgan Stanley’s shift to wealth management under CEO James Gorman, sending shares up nearly 6 percent by the end of the session.

On the other hand, Goldman Sachs shares fell more than 6 percent as investors punished the bank’s diversification into retail banking.

CEO David Solomon, who celebrated his 61st birthday yesterday, acknowledged that Goldman’s performance in the fourth quarter was “disappointing.”

Last week, Goldman began cutting thousands of jobs in New York, London and Hong Kong in its biggest cost-cutting program since the financial crisis.

Other US lenders less dependent on market cycles have benefited from a sharp rise in US interest rates as consumers deposit more of their money with banks, their results showed on Friday.

The only bright spot for Solomon and Goldman was the controversial commercial division. Income from trading fixed income, currencies and commodities exceeded expectations.

Were you affected by cost-cutting on Wall Street? Email me at firstft@ft.com or hit reply to this email – Gordon.

1. Global oil demand is expected to reach a record level The International Energy Agency predicted that oil demand this year will reach record levels as China reopens after abandoning the zero-COVID policy. The International Energy Agency said in its first monthly oil report for 2023 that oil prices may rise in the second half of the year as strong demand meets tight supply. US West Texas Intermediate crude, which rose 8 percent last week, rose above $81 a barrel this morning while Brent crude jumped to $87 a barrel.

2. The Bank of Japan maintains yield control measures The Bank of Japan defied market pressures and left its yield curve control measures unchanged, sending the yen sharply lower and stocks rallying as it stuck to the mainstay of its ultra-loose monetary policy. The decision comes after weeks of turmoil in the Japanese government bond market, during which yields rose.

3. The rise in shares of Chinese technology companies Shares of technology companies in China rose $700 billion as the country reopened and restrictions on the sector were eased. Hong Kong’s Hang Seng Tech is up nearly 60 percent from its October low, with heavyweights such as Tencent and Alibaba collectively gaining $350 billion in market capitalization.

Line graph of share price change (index to 100) showing tech stocks outperforming the broader rally in Chinese stocks

4. Ukrainian Interior Minister among 18 dead in a helicopter crash Officials say 18 people, including Ukraine’s interior minister and three children, were killed when a helicopter crashed near a nursery school in Kyiv. The cause of the crash is unknown, but authorities in Kyiv have opened an investigation, they said earlier today.

5. Republicans are targeting proxy advisors in the ESG backlash Republican US attorneys general have targeted corporate agent advisors, challenging Institutional Shareholder Services and Glass Lewis on their recommendations related to climate and social goals. The two companies, which dominate the business of guiding investors on board votes and shareholder decisions, are the latest financial groups to come under pressure from Republican state officials about attacking sustainable investing principles.

next day

market forecast European stocks and US futures are stable as investors bet that cooling inflation will allow central banks to halt interest rate increases earlier than previously thought. Today the UK became the latest country to report that inflation has fallen further from recent peaks.

Economic data The US publishes its retail sales and producer prices for December, and the Federal Reserve releases its beige book on economic conditions. The National Association of Home Builders will release its monthly housing market index.

Musk’s trial begins A group of nine jurors will hear opening arguments in a trial over Elon Musk’s tweets claiming he secured “secured funding” to take Tesla private in 2018. Read more about what investors claim.

NATO The alliance’s defense ministers, including their invited counterparts from membership applicants Finland and Sweden, are meeting in Brussels for a two-day meeting.

Yelin meets the Chinese economic czar US Treasury Secretary Janet Yellen is meeting with China’s economic czar in Zurich, in a move that signals Washington and Beijing’s commitment to improving relations.

corporate results United Airlines will have a full-year earnings call this morning with industry analysts. Last night it reported net income for the fourth quarter that was a third higher than in 2019 and expected 2023 revenue to be much higher than forecast. Broker Charles Schwab, infrastructure group Kinder Morgan, logistics firm JB Hunt and consumer bank PNC Financial all announced earnings today.

The World Economic Forum continues. Watch the daily Davos show, hosted by the Financial Times’ Andrew Hill, from 12 noon BST on January 17-19. Register here for free.

What else do we read?

Can Apple separate from China? In November, workers at Apple subsidiary Foxconn protested Beijing’s strict COVID-19 policies. The police responded with riot gear. When confronted by a reporter about the incident, Tim Cook refused to comment, in a scene that was later responded to and widely criticized by the US media. As the tech giant finds itself increasingly beholden to America’s greatest geopolitical rival, the question is whether or not diversification is possible.

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Disney activist investor focused on Fox deal Nelson Peltz, the activist investor trying to force his way onto Disney’s board of directors, has focused on a $71 billion deal that saw the entertainment company buy Fox Films and Television. Peltz blames the deal on what he calls “Disney’s balance sheet from hell,” saddling it with additional debt and preventing the company from returning cash to investors.

Address global debt before it’s too late Martin Wolf writes that the system we currently have for resolving the debts of poor countries is not “fit for purpose”. The same is true of helping poor countries through adverse shocks and towards sustainable development – and change is urgently needed.

Accountants seek control over climate data as disclosure rules loom large The US Securities and Exchange Commission is finalizing a rule requiring audited emissions data to be included in companies’ financial reports, while accounting standard-setters in Europe are about to publish new climate reporting guidelines. Developments increase risks for companies.

The arrest drains the power of the Sicilian mafia Experts say the capture of Matteo Messina Denaro, the latest fugitive from justice Cosa Nostra “The Godfather”, highlights the progress made by Italy’s security services against organized crime in the past three decades.

Take a break from the news

Who was the writer of the science fiction novel 1969? Andromeda strain? Try your hand at 1-cross in this FT crossword puzzle.

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