US Banks Muddy Market | A2 Milk 

18 January 2023

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, 0.6%) continued advancing Tuesday on optimism of China’s reopening.  

The heavyweights of the index were some of the best performers on the day, including Mainfreight (+3.5%) and Fisher & Paykel Healthcare (+2.4%). 

According to the NZ Institute of Economic Research, business confidence and other activity has fallen to its lowest level since the 1970s, with 73% of businesses expecting operating conditions to worsen over the coming months. 

Australia Market Movers 

The Australian market (ASX 200 Index, 0.0%) was flat on Tuesday. Utilities (-1.3%) lead the market down, but was balanced by Consumer Staples (+1.8%) as Woolworths (+2.5%) and Coles (2.0%) both added more than 2 per cent

Europe Market Movers  

European markets (Stoxx 600 Index, +0.4%) climbed on Tuesday, registering its fifth straight session of gains, with Mining (+1.0%) stocks leading gains on the day.  

US Market Movers 

US markets (S&P 500 Index -0.2%) struggled to build on momentum Tuesday, with Goldman Sachs (-6.4%) one of the biggest laggards.

One figure for Goldman Sach’s recent earnings call: 4.4%. That’s the return on equity of Goldman’s much-maligned consumer banking business, which highlights just how poorly the consumer banking foray has gone for Goldman and why it is winding back their consumer banking segment as a whole. Today’s earnings was really a tale of two rivals – Goldman’s and Morgan Stanley, and the results told different stories. Morgan Stanley (+6.0% intraday) reported its wealth management division now has $25B of assets under management. The news buoyed investors. Obviously, Goldman Sach’s consumer banking news did not quite have the same ring to it. But the comparisons don’t stop there — in the first quarter of 2021 Goldman reported a 31% return on equity, remarkable any which way you cut it. At the start of 2021 it reported +$7B in profits for that first quarter alone — and yet for all of 2022, Goldman reported profits of +$11B. Goldman is a highly cyclical business – under CEO David Solomon the business has become more cyclical, relying on lucrative M&A deal-making revenue in bull markets. We’re not in Kansas anymore, Toto. During lean years – like ’22 and likely ’23 – deal-making firms like Goldman do significantly worse, whilst Morgan Stanley is cushioned by its lucrative wealth management business and JP Morgan is buoyed by its vast retail banking outfit. Retain buy for JPM, neutral for MS and GS. 

Stock in Focus: A2 Milk (ATM.NZX) 

ATM (0.0%) closed flat yesterday, erasing midday gains, as investors digested news that China recorded its first population decline in 60 years. Births fell -10% to 9.56 million in 2022. Declines over the past few years means that the Chinese infant population (0-4 years old) is now -30% below 2019 levels. 

What Markets will be Watching this Week (UTC +13) 

Tuesday 
AU Westpac Consumer Confidence Index Jan

Earnings from Morgan Stanley, Goldman Sachs, United Airlines

Wednesday 
Inflation Data Canada, and Great Britan

Bank of Japan Interest Rate Decision

Thursday 
Eurozone CPI (Inflation Data

US Retail Sales and PPI data

Earnings from Costco, Proctor and Gamble, Netflix and Intuit

Friday 
Japan Inflation data

The New Zealand market (NZX 50 Index, 0.6%) continued advancing Tuesday on optimism of China’s reopening.  The heavyweights of the index were some of the best performers on the day, including Mainfreight (+3.5%) and Fisher & Paykel Healthcare (+2.4%). 

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