Morgan Stanley said Thursday its second-quarter profit fell 29% from a year ago, reflecting a drop in corporate deal making. The New York bank posted a profit of $2.5 billion, or $1.39 a share. Analysts polled by FactSet had expected $1.56 a share. Revenue fell 11% to $13.1 billion in the quarter, which also missed expectations of $13.39 billion. Investment-banking revenue, including fees from mergers and acquisitions, dropped 55%. Weak bond and stock markets, coupled with high inflation, led corporate executives to pause plans to make deals or take their companies public. CEO James Gorman said on a conference call with analysts that the pipeline of prospective new deals is strong, but that the bank will need higher confidence among corporate chieftains and lower market volatility to actually complete them. However, the wild market swings during the quarter were good for Morgan Stanley’s traders, whose revenue rose 21% from a year ago. Morgan Stanley also said it set aside $200 million in the quarter to settle a wide-ranging regulatory inquiry into the use of unapproved personal devices by bank employees. JPMorgan Chase & Co. agreed to pay $200 million to regulators last year to resolve a similar matter. JPMorgan admitted it failed to keep track of employees’ personal devices that circumvented record-keeping requirements.

The Swiss stock market ended Thursday's trading session weaker, weighed down by new inflation data from the USA. The SMI lost 1 per cent to 10,800 points. All 20 SMI stocks posted losses. 34.26 (previously: 36.49) million shares were traded. Bank shares were sold again. Rising market interest rates - actually positive for the business of financial institutions - did not help, as fears that an economic downturn could weaken the earnings situation of the industry prevailed. There are already signs of this among US competitors: The second-quarter figures of JP Morgan and Morgan Stanley published on Thursday disappointed, which also weighed on the shares of Credit Suisse (-3.5%), UBS (-2.2%) and Julius Baer (-2.2%). However, the biggest price loser in the SMI was the Givaudan share (-4.2%). The analysts of UBS had downgraded the share of the fragrance and flavour manufacturer to "Sell". Even other defensive stocks such as Nestle (-0.7%) or Swisscom (-1.3%) could not escape the general economic pessimism.

The European stock markets closed sharply lower on Thursday, amid the political crisis in Italy and disappointing quarterly results in the US banking sector. Concerns remain about the Federal Reserve's monetary tightening and the growing risk of recession. At the close, the Stoxx Europe 600 index lost 1.5% to 406.5 points. In Paris, the CAC 40 and the SBF 120 each lost 1.41%. In Frankfurt, the DAX 40 gave up 1.86% and the FTSE MIB fell by 3.44% in Milan. The FTSE 100 fell by 1.6% in London. Brookfield Infrastructure Partners LP and DigitalBridge Group Inc. have agreed to buy a stake in Deutsche Telekom AG’s tower business for roughly 6.6 billion euros, equivalent to $6.64 billion, raising their bet on a telecommunications sector that has seen a flurry of deal making in recent years. The German telecoms company on Thursday said it had agreed to sell the consortium a 51% stake in GD Towers, its tower unit in Germany and Austria, valuing the entire business at €17.5 billion. Deutsche Telekom expects cash proceeds of €10.7 billion, including debt of €4.1 billion, from the deal. Ericsson AB on Thursday posted a second-quarter net profit that missed expectations, but said it continued to see strong 5G sales momentum in North America and Europe. The Swedish telecommunications-equipment company reported net profit attributable to shareholders of 4.5 billion Swedish kronor ($426.3 million), compared with SEK3.68 billion a year earlier, as sales rose 14% to SEK62.47 billion.

The S&P 500 recorded a fifth consecutive down day as earnings reports from financial behemoths spotlighted concerns about the economic outlook. Stocks fell sharply after Thursday's open, then gradually recovered. The S&P 500 finished off 11.40 points, or 0.3%, to 3790.38. The Dow Jones Industrial Average lost 142.62 points, or 0.5%, at 30630.17. The blue-chip index also notched a five-day losing streak. The technology-heavy Nasdaq Composite Index inched up 3.60 points, or less than 0.1%, to 11251.19. Major benchmarks fell Wednesday after data showed inflation at a fresh four-decade high. The second-quarter earnings season ramped up Thursday, with reports from JPMorgan Chase and Morgan Stanley. More results from the country's top financial institutions are slated for Friday and Monday. With fears of a potential recession looming, investors are looking to what bank executives say about the state of the economy as much as their institutions' balance sheets. JPMorgan Chase shares fell $3.91, or 3.5% to $108 after the bank said it set aside another $428 million to cover possible future loan losses, suggesting it had grown more dour about the U.S. economy. The stock was a top decliner on the Dow. The KBW Nasdaq Bank Index shed 2%. Energy stocks were the worst-performing sector in the S&P 500, down 1.9%. Marathon Oil Corp. and Valero Energy Corp. both lost 1.6%. Other commodity-related companies also fell Thursday: Fertilizer stocks CF Industries Holdings and Mosaic each dropped 5.7%, among the biggest losers on the S&P 500. Conagra Brands saw the steepest decline on the S&P 500 after the food company's latest earnings report. Shares sunk $2.59, or 7.2%, to $33.15. The maker of Duncan Hines cake mixes and Slim Jim meat snacks said it plans further price increases in the coming months as it races to offset double-digit cost inflation.

Below-expected economic growth in the second quarter put the brakes on China's stock markets on Friday. China's GDP grew by only 0.4 per cent compared to the previous year, whereas economists had estimated a plus of 0.9 per cent. At the same time, industrial production in June did not meet expectations. In Shanghai, however, the composite index only lost 0.2 per cent because the weak data also triggered speculation about further stimuli for the economy. In Hong Kong, however, the index fell more sharply by 1.2 per cent.

The yield on the 10-year Treasury note rose to 2.957% from 2.904% on Wednesday, while the yield on the two-year note was unchanged. Bond yields rise as prices fall. The two-year yield remained above the 10-year yield, a situation known as an inverted yield curve that is often taken as a predictor of a recession.

CS lowers the Gerresheimer target to EUR 88 (94) – Outperform
UBS lowers Wacker Chemie to Neutral (Buy) – Target EUR 135 (205)
UBS lowers the Sika target to CHF 240 (315) – Neutral

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