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Goldman Sachs reported lower profits Tuesday on a big drop in revenues tied to corporate merger advising, but the firm still topped analyst expectations on strong trading revenues.

The big New York investment bank, which unveiled details of a reorganization plan, pointed to a “significant decline in industry-wide completed mergers and acquisitions,” as well as lower revenues from debt and equity underwriting.

But that drag was offset by elevated volatility in financial markets during the period, which led to “significantly higher” revenues in interest rate products and currencies and boosted performance in commodities and credit products.

The firm also scored higher net interest income tied to the benefits of higher Federal Reserve interest rates on its lending.

Profits were $3.0 billion, down 44 percent from the 2021 period, while revenues declined 12 percent to $12.0 billion.

The results come on the heels of similar reports from other large banks that have seen earnings drop, but still exceed expectations.

Goldman increased its provisions for credit losses compared with the year-ago period, citing growth in its consumer business, charge-offs for bad loans and the impact of “continued broad concerns on the macroeconomic outlook.”

The investment bank’s chief executive, David Solomon, told CNBC early Tuesday that businesses should be “cautious” in light of increased volatility.

“That doesn’t mean for sure that we have a really difficult economic scenario,” Solomon said. “But on the distribution of outcomes, there’s a good chance that we have a recession in the United States.”

Goldman plans to streamline its businesses to three operating segments from four, one of which is “platform solutions,” which will include consumer partnerships and its GreenSky acquisition of a fintech platform for home improvement consumer loans.

Shares rose 3.2 percen to $316.60 in pre-market trading.

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The Chinese Communist Party Congress opens in Beijing on October 16, a week after Washington imposed tight restrictions on exports of invaluable semiconductor technology to China in a bid to stop it from surpassing the US economically and militarily. As semiconductors emerge as a key battleground, FRANCE 24 spoke to the author of a new bestseller on these all-important pieces of silicon.

For years, semiconductors have been crucial to everything from fridges to ballistic missiles. But only recently have they captured public attention.

Washington demonstrated the US semiconductor industry’s almighty power in 2018 when Donald Trump’s Commerce Department banned Chinese telecoms firm ZTE from buying chips designed in the US. These measures nearly drove the company to collapse before the erratic then-president reversed the measure.

But semiconductors only came to dominate the headlines in early 2021. A constellation of factors – notably Covid lockdowns warping consumer demand – sparked a chip shortage crisis, which pushed up inflation and caused shortages of goods from cars to mobile phones.

Now the spotlight is on semiconductors once more ahead of the Chinese Communist Party Congress, after President Joe Biden’s Commerce Department unveiled on October 7 sweeping new measures curtailing US exports of semiconductor technology to China. This was part of Biden’s response to President Xi Jinping’s plans to wean China off US-designed chips and make it a world leader in the sector.

To look more closely at how semiconductors rose to the forefront of international economics and politics, FRANCE 24 spoke to Chris Miller, author of the recently published bestseller "Chip War" and associate professor of international history at Tufts University, visiting fellow at the American Enterprise Institute and Eurasia Director at the Foreign Policy Research Institute.

What are semiconductor chips and how did they become so central to the world economy and daily life?

Semiconductors are small pieces of silicon with millions and billions of tiny circuits carved into them. These circuits provide the computing power inside almost any device with an on-off switch: smartphones, computers, datacentres, automobiles and dishwashers.

The typical person will interact with dozens if not hundreds of semiconductors each day, though we almost never see them.

How important was the US’s advantage in semiconductors to its victory in the Cold War?

The US advantage in computing was crucial. From the earliest days of the missile race, the Pentagon was fixated on applying computing power to defence systems. The first major application of chips was in missile guidance systems, but today they are used in everything from communications to sensors to electronic warfare.

Just as the typical person will interact with dozens of chips each day, militaries are crucially reliant on chips' processing power and signals processing capability. What’s more, as militaries begin to experiment with increasingly autonomous systems, they’ll be even more reliant on advanced chips.

How did Taiwan – specifically the Taiwan Semiconductor Manufacturing Company (TSMC) – come to nearly dominate chip manufacturing? And what would happen to the world economy if TSMC’s facilities in Taiwan are damaged in war?

TSMC is the world’s most advanced maker of processor chips, thanks to its enormous scale and extraordinary manufacturing precision. Today, TSMC produces 90 percent of the most advanced processor chips, which go into everything from smartphones to PCs to datacentres.

If a war were to knock their production offline, the cost to the global economy would be measured in the hundreds of billions of dollars.

In Europe there’s this perception that we are behind when it comes to high-tech industries, but Dutch company ASML is the big exception to this. How did it come to play an invaluable role in chip manufacturing?

ASML produces the machines without which advanced chips can’t be made.

ASML’s specialisation is in lithography, and it has 100 percent market share in the production of the most advanced lithography machines. It has honed these capabilities over many years and today is a critical supplier to companies like Samsung, TSMC and Intel.

Do you think China has what it takes to match or supersede the US when it comes to semiconductors?

For several years now, Washington has been worried about the national security implications of China catching up in the semiconductor business, especially in light of Xi Jinping’s Made in China 2025 initiative making chips a top priority.

China has been investing many tens of billions of dollars into government chip-development programs. These programmes have delivered substantial progress in some spheres, notably chip design.

However, across the board, China remains far behind capabilities in the US, South Korea or Taiwan in terms of fabricating chips. In addition, all chip fabrication in China today relies on machine tools imported from abroad, largely from the US, the Netherlands and Japan.

Do you think President Joe Biden’s plans to bring more chip production back to the US are a good idea, given the security implications of the overwhelming majority of manufacturing of advanced processor chips being based in Taiwan?

Today 90 percent of the world’s most advanced processor chips are produced in Taiwan. Given China's growing military might and Xi Jinping’s aggressive nationalism, this is a risk to the global economy that has grown too large.

Efforts to diversify the geography of advanced chipmaking are a smart move from this perspective. This explains why the US, Japan and Europe are all trying to bolster their countries’ position in the semiconductor supply chain.

Optimism is seeping back into the U.S. stock market, as some investors grow more convinced that the economy may avoid a severe downturn even as it copes with high inflation.

The benchmark S&P 500 (.SPX) has rebounded about 15% since mid-June, halving its year-to-date loss, and the tech-heavy Nasdaq Composite (.IXIC) is up 20% over that time. Many of the so-called meme stocks that had been pummeled in the first half of the year have come screaming back, while the Cboe Volatility Index (.VIX), known as Wall Street’s fear gauge, stands near a four-month low.

In the past week, bullish sentiment reached its highest level since March, according to a survey from the American Association of Individual Investors. Earlier this year, that gauge tumbled to its lowest in nearly 30 years,when stocks swooned on worries over how the Federal Reserve’s monetary tightening would hit the economy.

“We have experienced a fair amount of pain, but the perspective in how people are trading has turned violently towards a glass half full versus a glass half empty,” said Mark Hackett, Nationwide’s chief of investment research.

Data over the last two weeks bolstered hopes that the Fed can achieve a soft landing for the economy. While last week’s strong jobs report allayed fears of recession, inflation numbers this week showed the largest month-on-month deceleration of consumer price increases since 1973.

The shift in market mood was reflected in data released by BoFA Global Research on Friday: tech stocks saw their largest inflows in around two months over the past week, while Treasury Inflation-Protected Securities, or TIPS, which are used to hedge against inflation, notched their fifth straight week of outflows.

“If in fact a soft landing is possible, then you’d want to see the kind of data inputs that we have seen thus far," said Art Hogan, chief market strategist at B. Riley Wealth. "Strong jobs number and declining inflation would both be important inputs into that theory.”

Through Thursday, the S&P 500 was up 1.5% for the week, on track for its fourth straight week of gains.

Until recently, optimism was hard to come by. Equity positioning last month stood in the 12th percentile of its range since January 2010, a July 29 note by Deutsche Bank analysts said, and some market participants have attributed the big jump in stocks to investors rapidly unwinding their bearish bets.

With stock market gyrations dropping to multi-month lows, further support for equities could come from funds that track volatility and turn bullish when market swings subside.

Volatility targeting funds could soak up about $100 billion of equity exposure in the coming months if gyrations remain muted, said Anand Omprakash, head of derivatives quantitative strategy at Elevation Securities.

"Should their allocation increase, this would provide a tailwind for equity prices," Omprakash said.

Investors next week will be watching retail sales and housing data. Earnings reports are also due from a number of top retailers, including Walmart (WMT.N) and Home Depot (HD.N), that will give fresh insight into the health of the consumer.

Plenty of trepidation remains in markets, with many investors still bruised from the S&P 500’s 20.6% tumble in the first six months of the year.

Fed officials have pushed back on expectations that the central bank will end its rate hikes sooner than anticipated, and economists have warned that inflation could return in coming months. read more

Some investors have grown alarmed at how quickly risk appetite has rebounded. The Ark Innovation ETF (ARKK.P), a prominent casualty of this year’s bear market, has soared around 35% since mid-June, while shares of AMC Entertainment Holdings (AMC.N), one of the original "meme stocks", have doubled over that time.

“You look across assets right now, and you don’t see a lot of risks priced in anymore to markets," said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

Keith Lerner, co-chief investment officer at Truist Advisory Services, believes technical resistance and ballooning stock valuations are likely to make it difficult for the S&P 500 to advance far beyond the 4200-4300 level. The index was recently at 4249 on Friday afternoon.

Seasonality may also play a role. September - when the Fed holds its next monetary policy meeting - has been the worst month for stocks, with the S&P 500 losing an average 1.04% since 1928, Refinitiv data showed.

Wall Streeters taking vacations throughout August could also drain volume and stir volatility, said Hogan, of B. Riley Wealth.

“Lighter liquidity tends to exaggerate or exacerbate moves,” he said.

Russia's economy shrank 4.0% year-on-year in the second quarter of 2022, the first full quarter of what Russia calls a "special military operation" in Ukraine, preliminary data from the federal statistics service Rosstat showed on Friday.

The economy is plunging into recession after Moscow sent its armed forces into Ukraine on Feb. 24, triggering sweeping Western restrictions on its energy and financial sectors, including a freeze of Russian reserves held abroad, leading scores of Western companies to quit the market.Rosstat did not provide any further details but analysts said the contraction had been caused by weakness in consumer demand and the aftermath of sanctions.

"June data suggests the contraction in the Russian economy seems to have bottomed out as the situation in some industries is stabilising," said Sergey Konygin, an economist at Sinara Investment Bank.

The second-quarter contraction in gross domestic product was not as deep as expected. Analysts polled by Reuters had on average forecast GDP would shrink 7% year-on-year in April-June after expanding 3.5% in the first quarter.

The central bank's analysts had expected GDP to contract 4.3% in the second quarter, saying it was on track to fall 7% in the third quarter. The central bank projects the economy will start recovering in the second half of 2023.

Given the highly volatile political environment, official forecasts for the depth of Russia's recession vary.

The economy ministry said in April that gross domestic product could fall by more than 12% this year - after growth of 4.7% in 2021 - in what would have been the biggest contraction since the mid-1990s.

But forecasts have softened since then as Russia pushes back against restrictions.

The central bank predicted in April that GDP would shrink 8%-10%, but last month revised that to forecast a 4%-6% contraction.

"GDP contraction will reach its bottom in the first half of 2023," central bank deputy chairman Alexei Zabotkin said on Friday. "The economy will move towards a new long-term equilibrium."

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Goldman Sachs’ consumer and wealth management arm believes 2022 will be a huge year for value stocks while the broader S&P 500 Index will see single-digit growth of 6.3%.

The New York-based behemoth is bullish on energy stocks and healthcare stocks. It’s also overweight commodities and financial institutions, specifically in the Eurozone. The firm remains bullish on U.S. equities and bearish on the unappealing returns of cash and bonds.

Goldman’s projected 6.3% S&P 500 return is more muted than last year's robust 26.9% and 2020’s 16.1% level, but a number of uncertainties could work against stocks this year.

Head of Tactical Asset Allocation Brett Nelson told Forbes that his firm sees an 85% chance of the S&P 500 moving higher in 2022 with the Covid-19 pandemic at the center of much of the uncertainty.

The Fed’s monetary policy is also being watched closely. Goldman Sachs anticipates at least three interest rate hikes of 25 basis points but it’s optimistic that higher valuations that have been partially justified by low rates have room to run before facing major headwinds. Looking at historical data, Nelson told reporters that if rates got up to 5%, it would pose a challenging environment with interest outpacing inflation and growth.

Goldman expects the year to end with 3.1% unemployment, lower than the current rate of 3.9%. They also foresee a sizable reduction in inflation with expectations for a 3.4% consumer price index for December 2022, a marked deflation from the 7% rate from this past December.

Nelson has seen much of his firm’s expectations of value outperforming growth play out in the first couple weeks of 2022 as technology stocks and other growth stocks struggle, and energy and other value firms outperform while the 10-year treasury has moved up rapidly over the last month.

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China just posted its strongest quarterly growth on record as the world's second largest economy continued its robust recovery from the coronavirus pandemic.

GDP growth of 18.3% year-on-year in the first quarter was the strongest since China began keeping records in 1992, and was driven by a surge in retail sales, industrial production and investment in fixed assets.

The big jump reflects the deep slump in activity in early 2020 but it keeps China on track for growth of between 8% and 9% in 2021, economists said, far ahead of the Chinese government's official target of more than 6%.

"We are fully confident that we can maintain the current recovery momentum throughout the year," said Liu Aihua, a spokeswoman for the National Bureau of Statistics at a press conference in Beijing on Friday.

First quarter retail sales jumped 34% from a year ago, while fixed-asset investment in urban areas gained nearly 26%. Industrial production increased by more than 24%.

"Growth remains pretty strong at this stage as Covid losers such as consumption and [capital expenditures] are catching up," said Larry Hu, chief China economist for Macquarie Group, in a research report on Friday.

Retail sales, which took a big hit last year because of the lockdown, had improved because Beijing eased travel restrictions after the Lunar New Year holidays in February, he added. Investments in manufacturing and infrastructure also picked up pace.

Trade also provided a strong boost. Customs statistics released earlier this week showed imports jumped more than 38% last month in US dollar terms compared to a year earlier, a sign that demand within China is picking up. Exports grew by nearly 31%.

Hu said the strength in imports was broad based, indicating a "consumption recovery." And Beijing should easily hit its target of more than 6% growth for 2021. "Growth could easily go to 8-9% with the low base," Hu added.

Nomura analysts predicted Friday that China's GDP would grow 8.9% in 2021.

Last month, Premier Li Keqiang said the government had set this year's growth target at "above 6%." That's more than enough to accomplish President Xi Jinping's long-term goal for the economy, though still less aggressive than some observers have said they would like to see. Some analysts have said the cautious target indicates that the government is taking account of the risk that Covid-19 makes a comeback.

Earlier this month, the International Monetary Fund raised its growth estimate for China to 8.4% for this year, saying that "effective containment measures, a forceful public investment response and central bank liquidity support" had facilitated the country's recovery.

Recovery 'leveling off'

But some analysts say the outlook for the rest of this year is less certain.

Chaoping Zhu, global market strategist for JP Morgan Asset Management, said quarter-over-quarter growth is a better indicator of the current strength of the Chinese economy.

GDP grew by just 0.6% compared with the final quarter of 2020. That's the slowest pace since China began its recovery from the pandemic. In the first quarter of last year, the economy shrank a record 9.7% from the previous quarter, before bouncing back as the government eased restrictions. From the second to fourth quarters of 2020, the economy grew by 11.6%, 3%, and 2.6% respectively, quarter on quarter.

"It shows that the Chinese economy has already normalized," Zhu wrote in a note on Friday.

Julian Evans-Pritchard, senior China economist for Capital Economics, also pointed out that the 18.3% surge is largely distorted by low base effects.

"This tells us little about the economy's current momentum, however, since it reflects a much weaker base for comparison from last year's Covid-19 downturn," he said. "With the economy already above its pre-virus trend and policy support being withdrawn, China's post-Covid rebound is leveling off."

• The S&P 500 erased its year-to-date losses late Monday as investors' rejuvenated risk-on attitude outweighed fears of lasting fallout from the coronavirus pandemic.


• The benchmark index plummeted as much as 34% from its mid-February peak before bottoming out on March 23.


• The market began its rally that day after the Federal Reserve announced a slew of unprecedented relief programs. Investors viewed the policies as a backstop for risk assets and kicked off the market's swift upswing.


• While the Nasdaq composite turned positive for the year on May 7, the S&P 500's rebound is spread across more industries than its tech-heavy peer.


• Watch the S&P 500 update live here.

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The S&P 500 wiped out its year-to-date losses in the final minutes of Monday trading as investors continued to shift focus from the recession to pile on bets on a historically quick economic recovery.

The benchmark US stock index sat roughly 34% below its mid-February peak on March 23 as the coronavirus pandemic spurred the fastest-ever plunge into bearish territory. On the same day, the Federal Reserve announced unprecedented steps to relieve pressure on markets and lenders. The central bank's pledge to purchase corporate debt lifted sentiments and drove record-pace buying activity.

Experts have referred to the Fed's actions as the spark for the stock market's rapid recovery. Before the central bank bought any corporate debt, investors rushed back into risky assets, confident the policy would serve as a backstop for sunken prices.

The S&P 500 isn't the first major index to retrace its steep losses. The Nasdaq composite accomplished the same feat on May 7, surging on growing inflows to mega-cap tech stocks. The S&P 500's rally, however, is far broader, led by soaring energy firms alongside Royal Caribbean Cruises, Lincoln National, and Apache.

"This is, in part, a reflation story. The market sees conditions as ripe for a strong and sustainable period of economic recovery," said Lauren Goodwin, an economist and multiasset portfolio strategist at New York Life Investments. "It's also become a story of defeating COVID-19. Beyond the traditional cyclical upswing, we saw a strong rotation into companies and sectors most deeply impacted by the virus."

Still, the rally isn't perfectly impartial. An equal-weighted version of the S&P 500 remains 2.6% lower this year, having tumbled far more on initial coronavirus fears than its more popular peer.

A spate of positive signals has fueled the index's run-up in recent weeks. Investors initially shrugged off nationwide protests against police brutality to bet on economic reopenings. Indexes tracking the US services and manufacturing industries pointed to stabilization after months of sharp decline.

Friday's jobs report shocked economists, as the unemployment rate dropped to 13.3% in May from 14.7%. Experts expected the metric to reach roughly 20%. Employers added more than 2.5 million jobs, trouncing estimates of 7.5 million payrolls lost over the month.

The S&P 500 closed at 3,232.39 on Monday, still down 4.7% from its intraday record on February 19.