Moody's upgrades Morgan Stanley outlook

Affirming Morgan Stanley's (MS +0.1%) Baa2 senior debt rating, Moody's boosts its outlook to positive from stable, meaning there's a likelihood of an upgrade in the medium term.

Noted by Moody's is the contribution to earnings from non-capital markets businesses (now about half of core earnings) which provide a "shock absorber" to more volatile results in capital markets.

"Notwithstanding these improvements, Morgan Stanley remains more heavily reliant on its capital markets business than many of its global investment bank peers. In particular, Moody's believes a critical challenge to improving firm-wide profitability will be strengthening returns in fixed income without adding more risk."

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