MS-P-Q

Morgan Stanley reported second-quarter earnings that beat market expectations, with trading revenue reaching an all-time high. Net profit rose to 5.58 billion dollars, or 3.46 dollars per share, from 3.54 billion dollars, or 2.13 dollars per share, a year earlier, surpassing the analyst consensus of 2.94 dollars per share compiled by LSEG. Net revenue climbed to a record 21.35 billion dollars, exceeding the forecast of 19.64 billion dollars. Equity trading revenue surged 69 percent from a year earlier to a record 6.3 billion dollars, while investment banking revenue jumped 58 percent to 2.44 billion dollars. The asset and wealth management business also saw assets under management cross the 10 trillion dollar mark.

Morgan Stanley expects global M&A deal value to reach a record $6.4 trillion in 2026. A strong stock market and recovering corporate confidence are driving an increase in transactions, putting the total on track to surpass 2021 levels. In the second quarter of this year, announced deals surged more than 64% year-on-year, while completed deals rose over 33%. The Trump administration's regulators are showing a more favorable stance toward large deals, providing a tailwind, and announced deals involving private equity have also increased by more than 10%. The firm sees M&A opportunities expanding as geopolitical uncertainty recedes, with corporate restructuring and the deployment of private equity dry powder set to accelerate.

Morgan Stanley interest rate strategists are recommending a position that bets on a widening yield spread between US 7-year and 30-year bonds, anticipating that the yield curve will steepen as short-term yields fall more than long-term yields amid fading expectations for Federal Reserve rate hikes. They expect the spread to widen from 63 basis points at the time of the recommendation to 100 basis points. The strategists noted that the interest rate market is pricing in too much tightening following soft US employment data for June. Morgan Stanley expects no rate hikes this year and a rate cut in March next year, and with the San Francisco Fed's proxy federal funds rate 100 basis points above the actual federal funds rate, they view this effective tightening as excessive and see the spread as a risk premium.