Morgan Stanley smashes Q1 forecasts with record equity trading and wealth gains

Local Market Commentary

The South African equity market closed higher on Friday, with the Top 40 gaining 0.45% to end at 79,448.0, and the All Share Index rising 0.42% to close at 86,406.5, supported by steady risk appetite. However, local political dynamics added a layer of uncertainty. The ruling ANC has reportedly dropped plans to raise VAT by 0.5 percentage points after acknowledging a lack of support from other parliamentary parties, according to the Sunday Times. This backtrack leaves a R13.5 billion gap in the national budget, placing Finance Minister Enoch Godongwana under pressure to find alternative revenue sources. Compounding matters, South Africa is facing diplomatic friction with the U.S., as top officials like Treasury Secretary Scott Bessent and Secretary of State Marco Rubio have skipped key G20 meetings hosted by South Africa. These strained relations could weigh on investor sentiment, especially ahead of November’s G20 leaders’ summit, where South Africa hands over the presidency to the U.S.

European Market Commentary

European equities ended the week on a cautious note, with the STOXX 600 slipping 0.1% on Friday to post a third straight weekly decline. Markets remained under pressure amid rising global volatility and investor concerns about the fallout from the escalating U.S.-China trade conflict. Beijing hiked tariffs on U.S. imports to as much as 125%, intensifying trade tensions and dampening risk appetite. Investors are now closely watching for signals from the ECB ahead of its next policy meeting, with markets fully pricing in a 25 basis point rate cut. ECB President Christine Lagarde noted that while the eurozone’s financial system remains stable, the central bank is monitoring the weakening U.S. dollar and rising external risks. Meanwhile, inflation in Germany eased, with March CPI confirmed at 2.3% year-on-year, down from 2.6% in February, giving the ECB some leeway to maintain its dovish policy stance.

U.S. Market Commentary

U.S. equity markets ended the week strongly, with all major indices posting solid gains on Friday as the earnings season kicked off positively. Financials led the rally after JPMorgan Chase, Morgan Stanley, and Wells Fargo all reported results ahead of expectations. Despite the upbeat numbers, management commentary reflected caution amid persistent economic and trade concerns. Sentiment was further buoyed by dovish remarks from Boston Fed President Susan Collins, who reaffirmed the Fed’s commitment to market stability. On the data front, inflation pressures showed signs of cooling, with the Producer Price Index falling 0.4% in March, reinforcing the view of a less aggressive Fed. However, consumer sentiment slipped, as the University of Michigan survey revealed short-term inflation expectations surged to 6.7%—the highest level since the early 1980s—raising concerns about consumer confidence and price stability.

Asia Market Commentary

Asian markets opened the week higher, supported by a temporary pause in trade tensions after President Trump delayed tariffs on key electronics like smartphones and laptops. This shift lifted sentiment across export-reliant economies. China’s March trade data provided an additional boost, with exports up 12.4% year-on-year, beating expectations. The surge likely reflects front-loading by exporters anticipating future tariffs, although the trend’s sustainability is uncertain. On the other hand, imports fell 4.3%, highlighting subdued domestic demand and structural headwinds. In Singapore, the central bank eased policy for the second consecutive meeting following weak Q1 GDP growth of 3.8%. The Monetary Authority of Singapore had already cut its slope in January, marking a clear pivot from the tightening cycle seen over the previous few years.

Currency Market Commentary

The rand gained modestly on Friday, supported by U.S. dollar softness and a mild improvement in risk appetite. Nonetheless, FX markets remain volatile amid ongoing trade tensions and domestic fiscal uncertainty. The ANC’s decision to abandon a VAT hike has cast doubt on the government’s fiscal path, while tensions with the U.S. are intensifying. Globally, the dollar index weakened slightly after mixed White House messaging. President Trump’s tariff delay helped calm markets briefly, but hints of further measures—particularly targeting semiconductors—kept investors wary. While the exemption on electronics eased short-term fears, uncertainty remains high. Currency markets are likely to stay reactive in the coming days, with central bank signals and trade developments continuing to drive direction.

Commodity Market Commentary

Crude oil prices declined as investors weighed the potential impact of an intensifying U.S.-China trade war on global demand. Both WTI and Brent moved lower in early trade, reflecting cautious sentiment. Goldman Sachs downgraded its oil forecasts, now seeing Brent at $63 and WTI at $59 for the rest of 2025, with further declines into 2026. Meanwhile, gold continued to attract safe-haven inflows, crossing the $3,200 per ounce mark on Friday amid rising geopolitical risk. Although prices dipped slightly after certain tariff exemptions were announced, sentiment remains bullish. Goldman Sachs lifted its year-end 2025 gold forecast to $3,700 per ounce, citing persistent central bank buying and strong ETF demand. Gold's recent momentum reinforces its role as a hedge against geopolitical volatility and dollar fluctuations.

Gemfields Group Limited (GML) -22.67%

Gemfields released its audited results for the year ended 31 December 2024 on Friday, alongside the announcement of a proposed USD 30 million fully underwritten rights issue to bolster working capital. The 10-for-21 rights issue, priced at 4.22p in the UK and ZAR 1.06860 in South Africa, is supported by major shareholders Assore International Holdings and Rational Expectations, who have committed USD 13.4 million in pre-funding loans, subject to shareholder approval at an upcoming EGM. Loss per share is expected to widen to USD 7.0c (ZAR 129.0c), with a headline loss per share of USD 2.1c (ZAR 39.1c) due to a challenging trading year. A shareholder and analyst webcast will follow the regulatory approval of the rights issue circular.

Vukile Property Fund Limited (VKE) +0.17%

Vukile’s subsidiary Castellana Properties has agreed to acquire the Forum Madeira Shopping Centre in Funchal, Portugal, through its 70%-owned subsidiary Caminho Propício for EUR 63.3 million. The acquisition, set to close by 30 April 2025, includes the operational companies behind the property and is expected to generate a 9.5% initial net operating income yield, with an 11.8% cash-on-cash yield before transaction costs. The fully occupied centre, with strong sales and high footfall, is strategically located in an expanding economy, offering solid growth potential. The deal will be financed with a mix of existing cash resources and a EUR 28 million debt facility.

Morgan Stanley (MS) +1.44%

Morgan Stanley exceeded Q1 profit forecasts, driven by record equity trading revenue and robust performance in wealth management. Equities trading jumped 45% year-on-year, particularly in Asia, with prime brokerage and derivatives seeing notable gains. Net income rose to $4.3 billion ($2.60 per share), outpacing analyst expectations of $2.20. Investment banking revenue increased 8%, aided by significant advisory roles and underwriting activity, including CoreWeave's $1.5 billion IPO. Institutional Securities revenue rose to $9 billion, and the bank recorded a gain from selling a loan linked to the 2022 acquisition of platform X. Wealth management income also improved, reaching $7.3 billion.

Wells Fargo's Company (WFC) -0.95%

Wells Fargo beat Q1 profit expectations, supported by cost reductions and lower credit loss provisions, although CEO Charles Scharf warned that US tariffs could weigh on growth. Net interest income declined 6% to $11.5 billion, below forecasts, and the bank incurred $149 million in securities losses. Credit quality remained stable, allowing provisions to fall to $932 million. Expenses declined 3% to $13.89 billion, reflecting ongoing staff reductions and tech investments. Investment banking fees rose 24% year-on-year to $775 million, driven by increased debt market activity. Adjusted earnings of $1.33 per share surpassed the expected $1.24.

JPMorgan Chase & Company (JPM) +4.00%

JPMorgan reported stronger-than-expected Q1 earnings on record equities trading and higher investment banking fees, though it remains cautious on economic outlook amid global recession risks. Provisions for credit losses nearly doubled to $3.3 billion, signalling a conservative stance on potential loan defaults. Net income rose to $14.6 billion ($5.07 per share), with adjusted EPS of $4.91 ahead of the $4.61 consensus. Trading revenue climbed 21% to $9.7 billion, with equities trading up 48% to a record $3.8 billion. Investment banking fees rose 12% to $2.2 billion. Net interest income increased 1% to $23.4 billion, with full-year guidance lifted to $94.5 billion.

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