Morgan Stanley

Sorry Luxury Shops, Morgan Stanley Bonuses Get Capped

The world’s largest brokerage, Morgan Stanley (NYSE:MS), announced today they will be limiting cash bonuses to $125,000 for senior executives. This decision comes as the banking sector saw one of the worst fourth quarters when it comes to trading and investments.

Morgan Stanley’s decision will increase the average amount of pay deferred to 75%. In 2009 and 2010, the company deferred 40% and 60% respectively.

The banking sector as a whole has been getting hard in recent days starting with JP Morgan Chase & Co. (NYSE:JPM) last week. Last quarter, JPM saw profits dip 23%. Fast forward to today and Citigroup Inc. (NYSE:C) announced its profits fell 11%. There is some good news though, mainly from Wells Fargo & Co. (NYSE:WFC). Wells Fargo saw fourth quarter earnings jump 20% thanks to increases in commercial loans and mortgage demand in the latter half of 2011.

Investors will have a better feel on the sector later this week when Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) report their earnings. Goldman could get hit the worst since Citigroup and JPMorgan earnings disappointed due to weak investment banking and trading results.

Morgan Stanley Will Lay Off 580 Workers In New York

Morgan Stanley announced earlier this month they will cut 1,600 jobs. Of those 1,600, 580 of them will be in New York. The poor economy continues to hit the job market hard and banks are laying off worker as well. Morgan Stanley isn’t the only bank cutting jobs. Citigroup (NYSE:C) announced earlier this year that it would get rid of 4,500 jobs or about 1.5% of its worldwide work force.

Bank of America (NYSE:BAC) announced job cuts as well with 30,000 jobs cut over the next couple of years. Swiss bank, UBS, also announced 16,000 job cuts.

Morgan Stanley announced these specific job cuts in a filing today and the cuts will come from four of its New York locations. These layoffs account for about 2.6% of the company’s workforce. The company also said the lay offs will be company wide affecting all levels and will take place during the first three months of 2012.

Morgan Stanley (NYSE:MS) is currently trading down 2.42% at $14.92. MS is down on light volume today with only 7.1 million shares traded. The company trades 36.8 million shares a day on average.

India’s Growth Rate Expected To Slip Below 7%

India’s economic growth rate is forecast to slip below 7% for the first time in over two years. This will add pressure to India’s Reserve Bank to end its long campaign to fight inflation. While emerging markets saw fast growth after the 2008 financial crisis, they are beginning to see the downside of that fast growth.

India’s GDP figures are due to be released on Wednesday. The gross national product is expected to show growth of 6.9% from the year-earlier quarter, according to the average forecast of economists polled by Dow Jones Newswires. That’s down sharply from 7.7% growth in the previous quarter and 8.9% growth in the year-earlier quarter.
The Reserve Bank of India has hiked interest rates 13 times since March 2010 to curb excess demand and stem inflation, which remains above 9%. But other factors, namely the crisis in Europe and slower growth in the U.S., are now also fueling investment uncertainty and curbing demand for Indian-made goods.

India’s services sector, forecast at 9% year-on-year, remains the main factor supporting growth, along with agriculture, where growth of 2.6% is expected, according to Religare Capital Markets.

Most of India’s economic slowdown is expected to come from industrial production, where growth fell more than expected in September, led by lower manufacturing and electricity production, as well as mining, which has also been hit by land acquisition and weather-related issues.

In October, India’s Reserve Bank lowered its growth forecast for the year ending in March to 7.6% from 8%, citing the impact of monetary tightening and the weakening growth momentum in the U.S. and the euro zone debt crisis.

In a note on Monday, Morgan Stanley (NYSE:MS) lowered its growth forecast for all of Asia for the rest of the year and next citing slow growth in the U.S. and risks to growth in debt laden Europe.

Morgan Stanley (MS) Cuts Global Growth Forecast

Morgan Stanley (NYSE:MS) has a bearish view on the Global economic outlook for 2012. “Our economics team in Europe now expects a recession in Europe while the U.S. economy is expected to continue growing below its trend,” said Morgan Stanley. Morgan also cut its 2012 growth estimate for Asia to 6.9% from 7.3%.

“Since we downgraded our regional growth outlook in August 2011, we have been constantly worried about the increasing downside risks to growth. In addition to further evidence of weakening domestic demand, the external environment in Europe has made us more concerned about the region’s growth outlook,” economists at Morgan Stanley said in a research note on Monday.

Most analysts agree it looks as though Europe will fall into a full-blown recession. “The European economy is already essentially in recession, I think the UK is following close behind,” Russell Jones, Global Head of Fixed Income Strategy at Westpac Institutional Bank told CNBC on Monday. According to Jones, he believes the hopeful data on the U.S. economy while good, will most likely not last. “It is quite possible, we could be back in an environment that looks awfully redolent of 2008, quite soon, and that’s very troubling,” he added.

The Economic Outlook just released by the Organization for Economic Co-operation and Development paints pretty much the same picture except that group forecasts the U.S. economy will continue a slow pace of growth while the rest of the world’s major economies will see a slowdown.

Emerging-markets stocks may rise 39% by the end of next year, spurred by a “soft landing” for China’s economy, earnings growth and cheap valuations, according to Morgan Stanley.

The MSCI Emerging Markets Index may jump to 1,355 by the end of 2012, from the 900-1,000 range it has been hovering at this month, said Jonathan Garner, Morgan Stanley’s chief emerging-markets and Asia strategist. The U.S. brokerage firm has joined UBS AG in favoring Chinese stocks for next year, bolstered by confidence that the government will loosen monetary policies to support Asia’s biggest economy. Morgan Stanley favors China and its consumer companies most among the Asian emerging markets.

Threat of Removing Greece From Eurozone Has Opened Pandora’s Box Says Morgan Stanley

As if the market does not already have enough uncertainty, today we see a shocking note from Morgan Stanley (NYSE:MS) to its clients. Morgan Stanley’s Joachim Fels sent a note to clients talking about how the markets will come to grips with the so called “comprehensive solution” presented at the EU summit a two weeks ago. Fels believes that when Chancellor Merkel and President Sarkozy raised the possibility of a country leaving the Euro, a Pandora’s Box was opened. He goes on to talk about how this could potentially lead to runs on “sovereign and banks in peripheral countries that make everything we have seen so far in this crisis look benign.” Below you can see the whole note. It is definitely an interesting read.

Full Note from Morgan Stanley’s Joachim Fels sent to clients

The Emperor has no clothes. This coming week markets are likely to continue to grapple with the notion that the ‘comprehensive solution’ presented after the EU Summit on October 26 is neither comprehensive nor a solution. First, bank recapitalisation was always about curing the symptoms rather than the disease – sovereign risk. And by giving banks until mid-2012 to meet the capital ratio target, governments have likely set in motion a wave of deleveraging that could have severe economic and market consequences. Second, the leveraged EFSF may still turn into a bazooka, but so far it looks more like a water pistol. We continue to doubt that investors will find the insurance and SPIV constructs appealing, and as the G-20 meeting this Thursday and Friday made clear, non-European governments also stand to be convinced that co-investing with the EFSF make sense. But perhaps euro area finance ministers will unveil some more reassuring details on the construct after their meeting this Monday/Tuesday – don’t hold your breath though. Third, the Greek political saga continues and even though the prime minister won the confidence vote in the early hours of Saturday, the second bail-out and debt restructuring package still needs to be approved and likely new elections late this or early next year could spring additional uncertainties. And fourth, but not least, while the ECB cut rates on Thursday, ECB President Draghi made it clear in the press conference that the bond purchase programme remains temporary and limited (see the quote of the week below), suggesting that hopes for large-scale monetary financing remain just that, at least for now.

Another Pandora’s Box opened? However, my main takeaway from last week and my main worry for the weeks and months ahead is that Chancellor Merkel and President Sarkozy, in response to the idea of a Greek referendum on the bail-out package, raised the possibility of a country leaving the euro – so far a taboo in European political circles. This is the second time in less than four months that European leaders could have opened a Pandora’s Box: on July 21, the decision to involve the private sector in the Greek bailout signaled that euro area government debt is no longer risk-free and thus sparked massive contagion into Spanish and Italian debt markets. This past week, by raising the possibility that a country might (be forced to) leave the euro, core European governments may have set in motion a sequence of events which could potentially lead to runs on sovereigns and banks in peripheral countries that make everything we have seen so far in this crisis look benign. But maybe I’m too pessimistic after another long week.

ht Zerohedge

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