Morgan rocks global stocks

World markets plunge.

Stocks retreated in Europe and Asia, led by financial companies, after Morgan Stanley said the outlook for credit markets had worsened and Fortis reported profit that trailed analysts' estimates. US index futures declined.

Fortis tumbled the most in more than four years. Deutsche Bank and the Credit Suisse Group also declined in Europe.

The Mitsubishi UFJ Financial Group paced a drop by Asian lenders, while Bank of America Corp fell in German trading. The American International Group slid after earnings missed estimates.

Morgan mayhem
Morgan Stanley on Thursday joined Merrill Lynch & Co and Citigroup in booking losses on the sub-prime-mortgage- related assets and said the outlook for credit markets was bleaker than in September.

The second-biggest US securities firm by market value after Goldman Sachs Group said it lost $3.7 billion in the two months through October 31.

Prices for securities linked to home loans to risky borrowers sank further than traders expected, cutting fourth-quarter earnings by $2.5 billion, the New York-based bank said. The figure may change by the end of the month.

Merrill Lynch, the third-largest firm, said two weeks ago that it wrote down $8.4 billion of leveraged loans and fixed- income securities, while Citigroup, the biggest US bank, said on November 4 that its holdings lost as much as $11 billion of their value in October.

Colm Kelleher, Morgan Stanley's chief financial officer, said markets might take three to four quarters to recover instead of the one or two he predicted in September.

"The healing process will take longer,'' Kelleher, 50, said in an interview yesterday. "The dislocation in the market has been quite severe, liquidity has dried up.''

Concern about potential writedowns at Morgan Stanley has pushed the stock lower this week, bringing this year's decline to 24 per cent.

The shares fell 6.9 per cent to $51.19 in the NYSE composite trading yesterday and traded up at $51.35 in Germany as of 11:15 am local time. Citigroup and Merrill are both down more than 40 per cent this year.