Morgan Stanley’s stock, bond traders push profit to record

in his firm’s bondtrading business even as the industry suffered in recent years from calm markets that cut demand for fixedincome services. Now, rising rates and political uncertainties offer a chance for the unit, led by Sam KellieSmith, to boost revenue and catch up to its stock-trading business, which is the world’s biggest.

“The beat came from almost every revenue line item, but was largely driven by sales and trading,” Chris Kotowski, a bank analyst at Oppenheimer & Co., wrote in a note to clients. He described the bank’s results as “firing on all cylinders.”

Shares of the firm, which gained 1.5 per cent this year through Tuesday, advanced US$1.64 to US$54.88 in early New York trading, be- fore falling back to close at US$53.26, up two cents.

Morgan Stanley’s biggest shareholder, said in a statement it would sell shares back to the bank to keep its ownership interest below 24.9 per cent, the level it agreed to when the alliance began in 2008.

The bank credited securitized products and foreignexchange for driving the fixed-income trading division’s performance.

“Debate around the direction of rates and speed of rates led to more volatility,” chief financial officer Jonathan Pruzan said.

Morgan Stanley experienced “a little bit of a slowdown in the second half of the quarter as some of the dialogue shifted to geopolitical risk and trade wars and the domestic political headlines,” Pruzan said. “Seasonality is going to play a part here, so I don’t think all these results are sustainable across all of the quarters.”

Morgan used electronic systems to grab the stocktrading business of quantitative hedge funds that have increased assets in recent years. Morgan Stanley president Colm Kelleher said he wants to do the same for bonds.

Investment-banking revenue climbed seven per cent to US$1.51 billion, better than the 1.4-per-cent slump that analysts expected, according to estimates compiled by Bloomberg. The New York-based bank was the No. 1 adviser so far this year on mergers and acquisitions, data compiled by Bloomberg show. they have been volatile since the tariffs’ announcement, given news over which countries might be exempted.

Shares of Steel Dynamics, also due to report after the bell on Wednesday, are up 7.3 per cent so far this week, while Nucor, due to report Thursday, is up 6.2 per cent. The S&P 1500 steel index, however, is down 4.7 per cent since March 1, when Trump announced the tariffs.

“What investors are going to be keenly aware of is what the outlook is for the second quarter,” said Philip Gibbs, analyst at KeyBanc Capital Markets. “For Nucor and Steel Dynamics, it’s going to be very good because these companies have a very high spot orientation and we know spot prices ... have gone up a lot since the announcement of the tariffs.”

All three stocks also look less expensive relative to the broader market. Alcoa is trading at about 15.7 times forward earnings compared with 16.7 for the S&P 500, according to Thomson Reuters data.

Steel Dynamics is trading at 10.5 times forward earnings and Nucor at 10.9 times.

For the first quarter, analysts expect earnings for Alcoa of US70 cents a share. Steel Dynamics is expected to report US91 cents a share and Nucor to report US$1.10 a share, according to Thomson Reuters I/B/E/S.