What's going on?
Morgan Stanley brought up the rear of a mixed week for the world’s biggest banks as its quarterly results missed expectations on Thursday.
What does this mean?
Both profit and revenue disappointed investors, with the latter falling 10% last quarter compared to a year before. As well as taking a heavier hit to its fixed income trading division than rivals, with revenue there down 30%, Morgan Stanley’s investment banking and wealth management activities suffered, too.
After Citigroup and JPMorgan also missed revenue expectations this week, investors needed some good news. And with Goldman Sachs and Bank of America, they got it: both smashed quarterly profit predictions on Wednesday. There were $3.5 trillion of company mergers and acquisitions in the last three months of 2018, much of it advised by investment bankers – and with its deal fees up 56%, they were probably from Goldman. Bank of America, meanwhile, relied on its traditional lending business to make up for the dearth in late-2018 trading.
Why should I care?
For markets: Golden Goldman.
Shares in the investment bank surged 10% on Wednesday, their best day in a decade, while Bank of America’s rose 7%. Investors who bought up Morgan Stanley stock in anticipation of great things there sent it back down 5% on Thursday when the truth emerged. But it wasn’t just banks getting caught in the stormy weather last quarter: BlackRock, the world’s largest investment manager, saw the amount of money it’s entrusted with shrink 7% thanks to the market turmoil.
For you personally: Housing’s heating up.
US mortgage applications rose to their highest level since 2010 last week, spurred by the lower interest rates currently on offer. With economic uncertainty leading to more demand for US government bonds, and the central bank likely to slow its baseline interest rate hikes this year, banks have lowered their own rates, attracting more would-be homebuyers. And homebuilders are feeling the buzz too: the mood at those companies bounced off recent lows in January, boosted by the higher demand for houses.