Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Strong Profits From U.S. Banks Lift Markets

Published 17/10/2018, 10:59
Updated 14/12/2017, 10:25

US banking stocks are having a field day after Morgan Stanley(NYSE:MS) (NYSE:MS) and Goldman Sachs (NYSE:GS) reported higher than expected earnings.

Morgan Stanley managed to ramp up profits in the third quarter by 20% on the year, boosting income from the wealth management side of the business, trading and investment banking. Similarly Goldman Sachs' (NYSE:GS) results also beat analysts’ forecasts with equity trading offsetting some of the weakness in its bonds trading.

One bitter note was sounded by BlackRock (NYSE:BLK), the world’s largest money manager, as the company warned that the global trade wars are causing investors to pull out of some of the riskier assets. The DJIA, S&P 500 and the Nasdaq all powered higher on the day, helping dispel last week’s gloom over rising bond yields.

The FTSE took its cue from Wall Street but with Brexit negotiations not nearing any resolution the pickup in the UK index was only a fraction of the rise US in markets. EU negotiators remain sceptical about the possibility of a deal during the region’s summit Wednesday as the issue of the Irish border remains a stumbling block. But their pessimism didn’t seem to slow down sterling and the currency firmed 0.35% against the euro and 0.45% against the dollar.

Oil prices static despite tensions

Oil prices have been declining for a few days now despite the looming Iran sanctions and friction building up between the US and Saudi and Tuesday it finally became clear why. Russia’s supply restraint agreement with the oil cartel OPEC which became effective in 2017 seems to have come to an end and the country is now pumping more oil than ever. The higher production stems from domestic requirements because the country’s budget depends on the oil income but it also partly comes in response to the lobbying from the US to increase output to counteract the potential shortage that might be caused by sanctions against Iran.

Tesco (LON:TSCO) shares fall

Tesco is back in the limelight for the wrong reasons as former Tesco chairman Richard Broadbent testifies at the criminal trial against two former executives this week. Tesco shares have been tainted by the ongoing trial over fraud and false accounting in 2014 and will likely remain in focus for a while as the trial is expected to drag on into December. The retailer’s shares have slipped 3.52%, leading the FTSE fallers today.

Asos remains a strong business

After a bumpy year, Asos has produced a good set of final numbers that indicate recent negativity toward the stock may have been overdone. Especially warm weather across Europe doesn't appear to have had the negative impact on sales that many in the market had feared. For the size of its profits, Asos still has one of the highest price tags on the market so it's not surprising to see investors get skittish at any hint of a guidance miss.

But at a fundamental level, it remains a strong business with excellent growth prospects. Since it was established in 2000, Asos has staked out a well-established brand position with geographic diversification in what remains a growing global e-commerce market. Rising competition from Amazon (NASDAQ:AMZN), which introduced its new Wardrobe business last year, shouldn't be scoffed at though. So it's pleasing to see that management appears to be getting the balance right between growing earnings and investing in the product offering.

Softcat remains in good shape

Softcat has fallen short of the market's lofty expectations but the business remains in good shape. Growth in customer numbers has slowed to 4.7%, compared to 6.0% at the first half, which will stoke concerns that the group's stellar run is at least moderating. On the positive side, the amount of profit that Softcat is making out of each customer has grown fantastically

Softcat is successfully cross-selling security products as businesses become more paranoid about cyber-attacks and regulators threaten harsher penalties if they don't keep hackers out. Company executives are also demanding greater storage capabilities, so they can comb vast troves of data for fresh insights into customer behavior and new market opportunities. Those fundamental demand drivers and the quality of Softcat's offering should support further growth in the years ahead, though management is hinting growth may slow this year by mentioning that 2018 conditions were 'exceptional'.

"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.