Wednesday April 26

US stocks finished marginally lower after reversing gains set earlier in the session. The S&P 500 fell less than 0.1% to 2,387 and the Dow Jones fell 0.1% to 20,975. The KBW Bank index rose 0.3% while utilities fell 0.5%. Economic data today showed that crude oil inventories fell 3.6 million barrels last week which marked three consecutive weeks of declines. The tax proposals unveiled today didn’t offer any firm details other than what had been released earlier in the week. The tax proposals were in line with expectations which explains why stocks didn’t move much. The corporate tax rate will fall from 35% to 15% and there will also be measures that encourage companies to repatriate cash held overseas. On that backdrop the 2 year Treasury yield fell 1bp to 1.27%. The 10 year Treasury yield also fell 1bp to 2.30%. 2yr vs 10yr was unchanged at 1.04%. The dollar was mixed on the day against peers. USD rose 0.2% against EUR to $1.0907. USD fell less than 0.1% against JPY and GBP. Those currency pairs finished at Y111.01 and $1.2852 respectively. The Mexican peso was down 1.7% as the Trump team has started to unveil some tariffs on trade partners such as Canada. Oil prices were lower even in spite of the bullish EIA data. WTI fell 0.6% to $49.25 and Brent fell 1.1% to $51.54.

Shares of Credit Suisse rose 2.8% today after announcing a $4bn capital raising through issuing new equity. Credit Suisse is following in the footsteps of Deutsche Bank and issuing new equity in order to alleviate concerns about their capital situation. It announced this simultaneous with an announcement that it would abandon a partial sale of its Swiss banking unit. Earnings today from Credit Suisse showed a $598mm net income compared to a net loss last year. Earnings were significantly higher than expected driven by wealth management and markets divisions. The new share issuance will raise its key core capital ratio to 13.4%. Chief Executive Tidjane Thiam cited attractive market conditions as the reasoning behind this particular timing to issue new equity, and said that the bank would use the new capital to make attractive investments across its business.

Some analysts are pointing out that equity markets and macro markets are sending mixed signals over the outlook over economic growth. Stock valuations are currently quite elevated and the Nasdaq set an all time record yesterday. However yields have been on the decline in fixed income markets which could reflect lower growth and inflation expectations. Similarly TIPS bond funds experienced outflows for the first time since the election which also is a bearish signal for inflation and growth expectations. Prices of oil and other commodity prices have also been falling which could be a sign of weak demand from industrial buyers. Additionally China continues to be a source of concern. Total assets at the PBoC are falling and in recent weeks China has appeared to be quite willing to let equity and credit markets reprice when tightening monetary conditions. That could reflect a structural shift in ideology from regulators there, which could have negative implications for the country’s ability and willingness to support growth by government spending and stimulus. If they do step off the gas pedal there it would have negative implications for global growth.

Wednesday April 26

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