New York / Singapore: Goldman Sachs’ first-quarter profit beat forecasts, a further sign that the worst may be over for financial firms in the eye of the storm, but Singapore devalued its currency after a record GDP fall.
Banking shares in Asia rose on optimism about the US financial sector after Goldman’s earnings while markets such as Hong Kong and Australia also climbed as they played catch up after the Easter holiday.
But other Asian bourses were mixed and US stocks ended little changed amid concerns that profits will be slow to recover elsewhere as economies struggle to resume growth.
US President Barack Obama said efforts to stimulate the US economy with infrastructure projects were “ahead of schedule and under budget”, but data highlighted the size of the challenges policymakers face in reviving trade and growth.
Gross domestic product in trade-dependent Singapore fell at a seasonally adjusted, annualised pace of 19.7% in first three months of the year, the ministry of trade said on Tuesday. The city-state’s central bank responded to the weak GDP data and soft export figures by easing monetary policy by effectively devaluing the Singapore dollar.
“Given all these horrendous numbers, this policy change is not a big surprise. It is reflecting the free fall in external demand,” said Song Seng Wun, economist at Malaysian bank CIMB in Singapore.
Qantas profit to nosedive
Companies are also suffering as the worst financial crisis since the 1930s restricts access to credit and hammers consumer confidence.
Facing slumping passenger demand and rising competition, Qantas Airways Ltd, Australia’s top airline, slashed its full-year pre-tax profit forecast by more than half and announced further capacity and job cuts, sending its shares down as much as 11%.
“We have faced accelerated declines in passenger demand and revenue while market competition has intensified,” Qantas Chief Executive Alan Joyce said.
“Qantas’ revenues have come under severe pressure, so it would be irresponsible to rely solely on stimulating demand through attractive pricing given the potential for unprecedented reductions in yield,” he added.
The news from companies was by no means universally grim, however.
After the closing bell on Wall Street on Monday, Goldman Sachs comfortably beat forecasts by posting first-quarter earnings of $1.66 billion, helped by strong trading revenue.
Goldman said it planned to raise $5 billion of common shares and use the proceeds, plus additional funds, to repay the $10 billion of capital it got from the US government under the Troubled Assets Relief Program.
That helped boost the Standard & Poor’s 500 by 0.3%, though a profit warning from plane maker Boeing and fears about a possible bankruptcy at General Motors Corp weighed on the Dow Jones industrial average.
“The market is cheering, not so much that the banks are on the mend but that they are not going to die,” said Les Satlow, portfolio manager of Cabot Money Management in Salem, Massachusetts. “My view is that a key crisis phase of this economic downturn is behind us.”
There were even some signs of improvement among the weak Singapore data.
While total non-oil exports fell 17% in March from a a year earlier, an 11th straight decline, the rate of fall slowed from January and February.
And significantly, shipments to China rose for the second month running, offering signs that the world’s third-largest economy may be headed for a recovery.
“The 17% drop in trade is a sign that exports are bottoming and consistent with the picture we’ve seen in major regional exporters like South Korea and Taiwan. China has also turned around,” said David Cohen at Action Economics in Singapore.
“Taken together, it seems that the first quarter will be the worst and things will start to get better. The trade data is certainly encouraging.”
US retail sales and producer prices later on Tuesday will provide a further clue as to the state of the world’s largest economy and are expected to show a slight rise in retail sales last month.