All eyes will be focused on Morgan Stanley today, as the US investment bank will be reporting its results for the third quarter.
The results will be closely scrutinised, after rival Lehman Brothers filed for bankruptcy protection on Monday.
Morgan Stanley chief executive John Mack was forced to defend his firm, saying it had a solid capital position and healthy revenues.
Analysts expect the bank to report earnings per share of US$0.80, according to a poll by financial data provider FactSet.
The US investment bank industry has suffered great losses in the credit crisis aftermath. It led to the collapse of Bear Stearns earlier this year, while Merrill Lynch said on Monday it has accepted a takeover bid by Bank of America.
This leaves Morgan Stanley and Goldman Sachs, which are generally seen as less exposed to the liquidity shortage.
AMP Capital head of investment strategy Shane Oliver said more bankruptcies could follow, and mentioned rumours surrounding other US financials, including Washington Mutual and AIG.
"They are probably the organisations that are at risk in the short-term," Oliver said.
The current woes in the US will have a limited impact on the Australian financial sector, Zenith Investment Partners director David Wright said.
"It seems that the Australian banks do not have major exposures to structured products," he said.
However, he said market sentiment will take a hit, which is likely to drive share prices down further.
