JPMorgan Chase & Co. and Goldman Sachs Group Inc.’s shares led sharp losses for bank stocks Tuesday, after Goldman Chief Executive David Solomon noted a drop in deal-making activity as well as a sell-the-news reaction to lighter capital requirements for financial firms. Additionally, JPMorgan Chase CEO Jamie Dimon said he wouldn’t rule out stagflation for the U.S. economy down the road, while consumer-finance company Ally Financial Inc. warned of pressure on its credit quality as consumers continue to struggle with inflation. JPMorgan falls 5.1% and Goldman Sachs slides 4.3% after Goldman CEO David Solomon noted a drop in deal-making activity, and after a long-anticipated, revised set of capital requirements from the Fed finally took form. Goldman’s third-quarter fixed-income and equities trading is down about 10% against an “extremely strong” year-ago quarter, mostly due to lower bond trading, he said. A pickup in private-equity deal-making has been slower than expected, Solomon noted, and the bank has been reducing its investments in its private company portfolio in a move that will reduce the amount of revenue it will book from its portfolio companies. These are two key factors that will impact Goldman’s third-quarter revenue by about $400 million, he said. Ally Financial ALLY said Tueday that credit-quality challenges had intensified in its core businesses of auto and mortage loans. “Our borrowers is struggling with a high inflation and cost of living, and now, more recently, a weakening employment picture,” Ally Financial’s Chief Fianncial Officer Russ Hutchinson said at the Barclays conference on Tuesday. Hutchinson said company still plans to achieve a 15% return on tangible equity but “the road is harder and the timeline to get there is longer.” Ally Financial’s stock was falling 17.6% Tuesday.

The Swiss stock exchange performed well on Tuesday compared to the other European markets. The fact that some defensive and heavily weighted shares such as Nestlé (+0.2%) and Swiss Re (-0.1%) were stable on the market had a supportive effect. The SMI lost 0.1 per cent to 11,965 points. Among the 20 SMI stocks, there were twelve losers and eight gainers. A total of 15.2 million shares were traded (Monday: 16.18 million). The day's SMI winner was Lonza (+0.8%). Roche, which had been very weak the previous day, was in second place, recovering by 0.6 per cent. Sonova brought up the rear of the SMI with a decline of 1.6 per cent. This was due to Apple's announcement at product launches that hearing aids can be integrated into the company's Air Pods going forward. This could limit the customer potential for hearing aid manufacturers, according to market concerns.

Europe
The European stock markets retreated on Tuesday, with investors adopting a cautious stance ahead of the publication of inflation figures in the United States, where fears of recession remain very strong. The Stoxx Europe 600 index fell by 0.5% to 508 points. In Paris, the CAC 40 and SBF 120 lost 0.2% and 0.3% respectively. The DAX 40 in Frankfurt shed 1% and the FTSE 100 in London slipped 0.8%. BMW (-11.2% in Frankfurt) lowered its financial targets for the current year, mainly because of the costs associated with the recall of more than 1.5 million vehicles. The top-of-the-range manufacturer also cited weak demand in China. The entire automotive sector slumped in the wake of these announcements. Mercedes-Benz and Volkswagen lost 4.9% and 3.4% respectively, while in Paris OPMobility (ex-Plastic Omnium) dropped 5.2%, Renault fell 3.1% and Stellantis 3%. Scor jumped 6.3% after press reports that the reinsurer had again been approached by insurer Covéa with a view to a merger. However, according to a source close to Covéa interviewed by L'Agefi, such a project is not on the cards. Capgemini (+5.3%) advanced in the wake of Oracle. Licensed perfume manufacturer Interparfums (-6.4%) reported a 9% drop in operating profit in the first half, citing an unfavourable basis of comparison.

United States
Investors are regrouping after the rollercoaster ride of the past few days in markets. Wednesday’s inflation report, meanwhile, could influence forecasts for next week’s Federal Reserve decision. Most predict the central bank will deliver a quarter-point interest-rate cut, but recent signs of economic weakness have led some to bet on a bigger move. Those economic fears intensified a weeks-long selloff in commodity markets. Gasoline and diesel futures haven’t been so cheap in more than three years, suggesting recent price cuts at gas stations are set to continue. Stocks were sluggish. The Dow Jones Industrial Average fell 0.2%, or 93 points, while the S&P 500 rose 0.4% and the tech-heavy Nasdaq Composite climbed 0.8%. Oracle shares rallied 11% after the software provider posted strong results boosted by its Nvidia partnership. Bank stocks retreated following an Ally Financial executive’s comments that borrowers are struggling with high costs of living, inflation and a weakening labor market. Boeing (-1.7%) announced on Tuesday that it had delivered 40 airliners in August, a quarter of them to China as a result of the resumption of deliveries to the country. Apple (-0.4%) will have to pay Ireland €13 billion in back taxes plus interest, according to a final ruling handed down on Tuesday by the Court of Justice of the European Union (EU). The European courts also dealt Alphabet subsidiary Google a setback (+0.3%). IT group Hewlett Packard Enterprise (-8.5%) reported on Monday evening that it had begun issuing preference shares convertible into ordinary shares in order to raise $1.35 billion to finance its acquisition of Juniper Networks.

Asia
Stocks in Asia and Australia mostly fell on Wednesday. In Shanghai, the Composite Index shed 0.9 per cent. The Hang Seng Index lost 1.4 per cent in Hong Kong. Against the negative trend, automotive stocks are in demand after members of the BYD management team (+1.6 per cent) increased their stake in the electric car manufacturer by buying A-shares. Li Auto rose by 3.2 per cent. The Nikkei 225 index falls by 1.4 per cent in Tokyo. In Seoul, the Kospi dropped by 0.6 per cent. On the stock market in Sydney, Australia, the S&P/ASX-200 declines by 0.3 per cent. Across the region, shares in the oil sector are under pressure after the oil price fell sharply the previous day. This was due to fears of a cyclical decline in demand. In Hong Kong, CNOOC lost 4.4 per cent of its value. Inpex slipped 4.6 per cent in Tokyo and Woodside shed 2.4 per cent in Sydney.

Bonds
U.S. government debt yields slipped on Tuesday as investors waited for the next important piece of macroeconomic data, the U.S. August consumer-price-index report, on Wednesday. The 10-year Treasury note yield gave up 5 basis points to 3.644%, while the 2-year Treasury note yield eased by 6 basis points to 3.604%.

Analysis
Barclays downgrades Nestlé to Equalw. (Overw.)/Target 92 (95) CHF - Trader
Baader raises Softwareone to Buy (Add)/target CHF 18.50 - Trader
Barclays cuts Richemont target to CHF 150 (164)/Overweight - Trader
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