Bloomberg News

Morgan Stanley Rises Most in S&P 500 After Touching 34-Month Low

October 04, 2011

Oct. 4 (Bloomberg) -- Morgan Stanley, owner of the world’s largest retail brokerage, rose 12 percent, the largest gain in the Standard & Poor’s 500 Index, after earlier dropping to the lowest level since December 2008.

Morgan Stanley rebounded in the last half-hour of trading, rising $1.54 to $14.01 at 4 p.m. in New York Stock Exchange composite trading. It was the biggest percentage gain since March 2009 and came after a report that European Union officials were examining ways to coordinate the recapitalization of struggling banks.

The Financial Times quoted Olli Rehn, European commissioner for economic affairs, as saying there is an “increasingly shared view” that the region needs a coordinated approach to halt the sovereign debt crisis. Morgan Stanley had dropped 17 percent over the two previous days as concern intensified that Europe’s debt crisis will infect U.S. bank balance sheets.

Credit-default swaps on New York-based Morgan Stanley fell 13 basis points to 570 basis points as of 4:01 p.m. in New York, according to broker Phoenix Partners Group. The contracts earlier traded as high as 650 basis points, the highest since October 2008, the month after Lehman Brothers Holdings Inc. filed for bankruptcy.

Mitsubishi UFJ Financial Group Inc. said it’s “firmly committed” to its strategic alliance with Morgan Stanley. Japan’s biggest banking group, which is the U.S. firm’s largest common shareholder, repeated its commitment in a statement yesterday “in response to recent market volatility.”

Morgan Stanley Chief Executive Officer James Gorman, 53, sent a memo to employees yesterday, encouraging them to remain focused on their jobs and clients instead of responding to “the rumor of the day.”

“There has been an enormous amount of confusion and misinformation about Morgan Stanley and others in our peer group,” he wrote in the memo, which was obtained today by Bloomberg News. “In fragile markets, where fear triumphs over common sense, these things are bound to happen.”

--Editors: William Ahearn, Peter Eichenbaum To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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