FirstFT: Wall Street rivals diverge

Good morning. Investors had dramatically different reactions yesterday to results from two of Wall Street’s biggest banks.

Both Goldman Sachs and Morgan Stanley reported that net earnings fell in the fourth quarter of 2022 and that investment banking fees were down almost 50 per cent, amid a dearth of mergers and new stock market listings.

But investors cheered Morgan Stanley’s shift into wealth management under chief executive James Gorman, pushing the shares up almost 6 per cent by the end of the session.

Shares in Goldman Sachs on the other hand fell more than 6 per cent as investors punished the bank’s diversification into consumer banking.

Chief executive David Solomon, who yesterday celebrated his 61st birthday, admitted Goldman’s fourth-quarter performance had been “disappointing”.

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

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

The one bright spot for Solomon and Goldman was the contentious trading division. Revenues from trading fixed income, currencies and commodities beat expectations.

Have you been affected by the cost-cutting on Wall Street? Email me at firstft@ft.com or hit reply on this email — Gordon.

Five more stories in the news

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

2. BoJ keeps yield control measures The Bank of Japan has defied market pressure and left its yield curve control measures unchanged, sending the yen sharply lower and stocks higher as it stuck to a core pillar of its ultra-loose monetary policy. The decision follows weeks of turmoil in the Japanese government bond market, during which yields surged.

3. Chinese tech stocks rally China’s tech stocks have staged a $700bn rally as the country reopens and a clampdown on the sector loosens. Hong Kong’s Hang Seng Tech index has soared almost 60 per cent from its October lows, with heavyweights such as Tencent and Alibaba gaining $350bn combined in market value.

4. Ukrainian interior minister among 18 killed in helicopter crash Eighteen people, including Ukraine’s interior minister and three children, were killed when a helicopter crashed near a nursery school in Kyiv, officials said. The cause of the crash is unknown but the authorities in Kyiv have launched an inquiry they said earlier today.

5. Republicans target proxy advisers in ESG backlash Republican state attorneys-general in the US have taken aim at corporate proxy advisers, challenging Institutional Shareholder Services and Glass Lewis over their recommendations tied to climate and social goals. The two companies, which dominate the business of guiding investors on board votes and shareholder resolutions, are the latest financial groups to receive pressure from Republican state officials on the attack over sustainable investing principles.

The day ahead

Market outlook European stocks and US futures are steady as investors bet that cooling inflation would allow central banks to pause their rate increases earlier than previously thought. The UK today became the latest country to report inflation had fallen further from recent peaks.

Economic data The US publishes its December retail sales and producer price index, and the Federal Reserve issues its Beige Book on economic conditions. The National Association of Home Builders will release its monthly housing market index.

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

Nato The alliance’s defence ministers, including counterparts invited from membership applicants Finland and Sweden, gather in Brussels for a two-day meeting.

Yellen meets China’s economic tsar US Treasury secretary Janet Yellen meets Chinese economic tsar in Zurich, in a move that signals Washington and Beijing’s commitment to improving ties.

Corporate results United Airlines will hold its full-year earnings call this morning with industry analysts. Last night it reported fourth-quarter net income a third higher than in 2019 and predicted 2023 revenues would be well ahead of forecasts. Broker Charles Schwab, infrastructure group Kinder Morgan, logistics company JB Hunt and consumer bank PNC Financial all report earnings today.

The World Economic Forum continues. Tune in to the Davos Daily Show, hosted by the FT’s Andrew Hill, from 12pm GMT January 17-19. Register here for free.

What else we’re reading

Can Apple decouple from China? In November, workers at Apple supplier Foxconn protested against Beijing’s strict Covid-19 policies. Police responded with riot gear. When confronted by a reporter on the incident, Tim Cook declined to comment, in a scene later widely replayed and criticised by US media. As the tech giant increasingly finds itself beholden to America’s biggest geopolitical rival, the question is whether diversification is even possible.

Disney activist investor focuses on Fox deal Nelson Peltz, the activist investor who is trying to force his way on to Disney’s board, has fixated on a $71bn deal that saw the entertainment company buy Fox’s movies and television business. Peltz blames the deal for what he calls Disney’s “balance sheet from hell”, saddling it with extra debt and preventing the company from returning cash to investors.

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

Accountants seek control of climate data as disclosure rules loom The US Securities and Exchange Commission is finalising a rule to require audited emissions data be included in corporate financial reports, while accounting standards setters in Europe are close to publishing new climate reporting guidelines. The developments raise the stakes for companies.

Arrest saps strength of the Sicilian mafia The capture of Matteo Messina Denaro, the last fugitive Cosa Nostra “godfather”, highlights the progress security services in Italy have made against organised crime in the past three decades, experts say.

Take a break from the news

Who was the writer of the 1969 sci-fi novel The Andromeda Strain? Try your hand at 1-across in this FT crossword puzzle.