Archive - Oct 19, 2010 - Story

Goldman announced Q3 results, in which revenue beat recently dramatically reduced estimates, coming at $8.9bln vs. Exp. $8.03bln, as the earnings print at $2.98 was markedly better than consensus of $2.29. Yet aside from the pig lipstick, results were a material deterioration from the prior year period: Net revenues in the catch all Trading and Principal Investments were $6.38 billion, 36% lower than the third quarter of 2009 and 3% lower than the second quarter of 2010. And revenues in the all important Fixed Income, Currency and Commodities (FICC), aka "whatever we want OTC spreads group" were
$3.77 billion, 37% lower than a strong third quarter of 2009, "reflecting
a challenging environment during the quarter, as activity levels were
significantly lower compared with the third quarter of 2009. The
decrease in net revenues compared with the third quarter of 2009
reflected lower results in each of FICC’s major businesses, including
significantly lower net revenues in interest rate products and credit
products." And for all those looking for the direct impact of the Goldman reputational damage, look no further than here: "Net revenues in Equities were $1.86 billion, 33% lower than a strong
third quarter of 2009. This decrease primarily reflected significantly
lower net revenues in the client franchise businesses, principally due
to lower activity levels compared with the third quarter of 2009." Lastly, some bad news for Goldman employees seeking a record bonus.

After the housing starts, we have the Fed executing multiple tranche open mouth operations as no fewer (and hopefully no more!) than seven members of the FOMC (not all voting) are on the docket...

• Brazil hikes tax on incoming fixed income investment to 6% from 4%.
• China remained a net buyer of US Treasurys in Aug. China's hldgs jumped $21.7B.
• Euro zone's current account deficit widened in August to €7.5B ($10.49B).
• German investor confidence may decline to 21-month low as economy cools.
• IMF advocates capital controls as a way to handle vast flows of capital into Asia.
• Oil falls from two-week high as US crude stockpiles forecast to increase.
• World Bank cuts China, East Asia growth outlook, cautions on 'bubble'.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 19/10/10

China has raised its key interest rate by 25 bps, marking only the first time it has done so since announcing it has recovered from the global crisis. Undoubtedly, this is its response to not being labeled a currency manipulator. However, as the US will most likely never raise rates again, and with the Yuan still pegged to the dollar, unlike in a typical recovery, where this would signal the elimination of excess liquidity in an attempt to prevent inflation, this time it is a largely symbolic move. Nonetheless, this will put some serious pressure on Chinese stock markets, on the US futures, and will be very "positive" for the dollar, which ironically defeats the whole point of the exercise.

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