While you were sleeping: Goldman profit, US retail sales, global unemployment

Wednesday 15th July 2009

Goldman Sachs Group posted record second-quarter earnings, beating expectations, in an endorsement of chief executive Lloyd Blankfein’s strategy to take on more risk as most rivals adopt more conservative positions.

Profit climbed to US$3.44 billion, or $4.93 a share in the second quarter even as the firm repaid government aid and doled out US$426 million of dividends. Fees from stock and bond sales helped swell profit. Revenue jumped to US$13.8 billion from US$9.42 billion a year earlier.

Goldman also set aside US$6.65 billion for employee benefits and compensation. Shares of Goldman rose 0.2% to US$149.66.

US retail sales climbed a greater-than-expected 0.6% last month, though the increase was driven by higher prices for gasoline, according to Commerce Department figures. Ex-auto sales rose 0.3%, less than expected, stoking concern consumer spending remains subdued. Labor Department figures showed the producer price index rose 1.8%, twice as much as expected.

Business inventories fell 1% in May, separate Commerce Department figures showed.

US Treasuries weakened on speculation the US recession may be abating, reducing demand for debt’s fixed payments versus growth assets.

The yield on 10-year notes climbed 12 basis points to 3.47% while the yield on 30-year Treasuries jumped 13 basis points to 4.37%.

The US dollar and the yen weakened against higher yielding currencies as the Goldman result and higher US retail sales stoked risk appetite.

The yen weakened to 93.29 per dollar from 92.97 yesterday and traded at 130.1 per euro from 129.95. The euro fell to $1.3942 from $1.3978.

Stocks on Wall Street rose. The Dow Jones Industrial Average climbed 0.3% to 8359.49, led by a 2.5% gain to US$23.68 for home-improvement retailer Home Depot. Intel climbed 2.1% to US$16.83 and Walt Disney rose 1.8% to US$23.11.

The Standard & Poor’s 500 rose 0.5% to 905.84 and the Nasdaq Composite climbed 0.4% to 1799.73.

Markit Group, the data services provider, said US Justice Department is investigating the US$26.5 trillion market for credit-default swaps. The department is looking into whether the banks that own Markit have unfair access to price information, Reuters and Bloomberg reported, citing people familiar with the matter.

Markit said it would cooperate with the investigation, without being specific.

Crude oil fell on speculation Energy Department figures this week will show US gasoline inventories are climbing, a sign that demand for fuel remains weak.

Crude oil for August delivery slipped 0.5% to US$59.41 a barrel on the New York Mercantile Exchange.

Copper rose on optimism demand for the metal in China will increase as its economy expands. Copper futures for September delivery rose 3.4% to US$2.299 a pound on the New York Mercantile Exchange.

Gold futures for August delivery edged up 0.3% to US$925.10 an ounce in New York.

The Organisation for Economic Cooperation and Development estimated that developed nations would lose almost 30 million jobs from the start of 2008 through 2010. OECD General Secretary Angel Gurria said the losses reflect the economic downturn and impact of the financial crisis.

RHJ International plans to offer about 300 million euros in equity and 3.8 billion euros in government guaranteed loans for a stake of just over 50% in General Motors' Opel automaker unit, Reuters reported, citing two people familiar with the matter.

RHJ plans to present the offer to the German government on Wednesday in Berlin, according to the report. The RHJ bid is lower than the 660 million euros offered by Beijing Automotive along with 2.64 billion euros in guarantees, the report said.

Stocks in Europe rose, sending the Dow Jones Stoxx 600 Index up 1.3% to 203.50, after Goldman Sachs’ results stoked appetite for equities. Deutsche Bank rose 2.6%, leading gains in banks. BNP Paribas SA climbed 3.1%.

BHP Billiton gained 3.5% and Rio Tinto Group rose 5.1% after prices of metals advanced.

National benchmark indexes rose in all 18 western European markets, except Iceland. The UK’s FTSE 100 climbed 0.9% to 4237.68 and France’s CAC 40 added 1% to 3081.87. Germany’s DAX increased 1.3% to 4781.69.

BMW jumped 5.3% after the Financial Times reported the automaker will increase production in the next six months. Renault gained 4.2%

Q-Cells SE fell 14% after the German solar energy products company posted a 62 million euro pretax loss for the second quarter percent and said it would miss 2009 earnings targets.

German investor confidence unexpectedly fell this month, dousing optimism for a quick recovery in economic growth.

The ZEW Center for European Economic Research’s index of investor and analyst expectations fell to 39.5 from 44.8 in June.

In the UK, the inflation rate fell below the Bank of England’s 2% target for the first time since late 2007. Consumer prices rose 1.8% in June and rising 2.2% in May, according to the Office for National Statistics.

Businesswire.co.nz

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