What's going on?

Shares of US investment banks fell on Tuesday, partly due to comments by Morgan Stanley and JPMorgan Chase � they warned that their second quarters wouldn�t be as rosy as their first.

What does this mean?

At a conference in New York, JPMorgan�s co-president said it expects its second-quarter revenues from trading will be roughly the same as the $5 billion it generated in the same period last year. At the same event, Morgan Stanley�s co-head of wealth management warned that its clients� activity had slowed since March, creating a challenging environment.


Back in April, banks reported better-than-expected first-quarter results, but their stocks fell � in part because investors worried that the combination of US tax reform, rising interest rates and turbulent market conditions that boosted growth would fade through the rest of the year.

Why should I care?

For markets: Banks are in a pickle � some more than others.

On Tuesday, US bank stocks fell by 3% on average, with Morgan Stanley�s near 6% decline topping the losers� table. Investment management is roughly a third of MS�s business, so any slowdown is a big concern for investors who backed the company�s efforts to focus on this (typically more predictable) area. However, the company�s working with the world�s biggest investment manager � BlackRock � to integrate better risk management technology. It hopes this will help encourage more cash through its doors � therefore allowing it to make more money by charging management fees.

The bigger picture: European banks have their own troubles.

Shares in Italy�s biggest banks both fell by 5% on Tuesday, while Germany�s Deutsche Bank fell by 6%. Investors were concerned that Italy�s potential spending plans could leave the country at risk of not being able to pay its debts. Banks are some of the biggest owners of government bonds � investors likely sold their stocks to avoid burning a hole in their pockets as the bonds fell in value � or worse, if Italy defaults.