Morgan Stanley Said to Plan Global Fixed-Income Job Cuts

1 Dec 2015 | Author: | No comments yet »

Morgan Stanley Calls 2016 the Year of the Yen With BOJ on Hold.

Morgan Stanley (NYSE:MS) reportedly plans to cut up to a quarter of its fixed income jobs over the next two weeks, resulting in the loss of hundreds of jobs, in reaction to the recent slump in bond trading activity. In what it calls an “out-of-consensus” prediction, the bank said it expects Japan’s currency to strengthen to 115 against the greenback at the end of 2016.Tribune Publishing Co., owner of the Los Angeles Times and Chicago Tribune, rose almost 10 percent Monday after media magnate Rupert Murdoch tweeted that the company may be sold. The cuts are expected to occur across all of the division’s offices, and in each of the firm’s trading desks, though London may bear a slightly bigger brunt than New York.

Murdoch, whose News Corp. owns the Wall Street Journal and New York Post, tweeted on Friday that he’d received “strong word” that Tribune would be bought by a big Wall Street firm and that the L.A. Morgan Stanley’s top trading recommendations for next year include buying the yen against the British pound, Swiss franc, South Korean won and offshore Chinese yuan, according to a Nov. 29 report. “The yen is the most undervalued of the group-of-10 currencies and is also at an extreme from a historical point of view,” said Ian Stannard, head of European foreign exchange strategy at Morgan Stanley in London. “The yen is likely to perform much better than the market consensus,” said Stannard, whose bank was among the top forecasters of foreign-exchange rates last quarter, according to Bloomberg rankings of 61 firms. Times would “go to philanthropist Eli Broad and local group.” Murdoch also said that he didn’t bid on the company and had “no interest.” In a memo to employees Monday, Tribune Publishing said it “is not engaged in discussions or a process to sell the company” and “remains committed to its strategy and transformation plan.” Even with the company’s assurance, Tribune shares rose on speculation of a possible sale. The yen has fallen more than 20 percent against the dollar since April 2013, when the Bank of Japan introduced unprecedented stimulus to boost the nation’s economy.

The potential cuts, which were reported earlier by Bloomberg News, reflect Morgan Stanley’s acceptance that a slowdown in client activity that set during the summer months may not reverse any time soon. Colm Kelleher, president of Morgan Stanley’s investment-banking and securities businesses, said earlier this month the firm has wrestled with how to size its fixed-income arm as the pool of trading business up for grabs continues to shrink. “The available fee pool in fixed income historically was assumed to be about $150 billion to $160 billion,” Mr.

Still, the central bank may refrain from added stimulus because it’s becoming more optimistic on prospects for the Japanese economy, Morgan Stanley said. The firm’s executives believed they would gain a bigger share of clients’ business over time, thanks to a credit-rating upgrade that made Morgan Stanley a more attractive counterparty and the gradual retreat from trading by many of its European rivals. Kelleher said during a Nov. 17 conference with investors. “What I don’t know yet is: What is the steady run rate of what we think fixed income should be?

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