Taxes scare stocks and cryptos, dollar retreats from highs ahead of PMIs

Stock markets are on the back foot amid concerns of higher US capital tax increases and rising covid cases in Asian countries. Cryptocurrencies are suffering an extended sell-off. PMIs from Europe, the UK and the US stand out.

The White House is mulling a substantial hike to capital tax gains for high-earners, in an attempt to fund social programs. Passing such legislation would fulfill campaign promises but the news caught markets wrong-footed, with the S&P 500 falling on Thursday the most since March. Global equities are trying to recover on Friday.

Investors are also concerned about India’s horrendous coronavirus wave. The country hit a new record in infections, around 330,000 and the death toll is also on the rise. Japan is also adding restrictions amid a new wave.

US 10-year Treasury yields have stabilized around 1.55%, pushing the dollar lower after safe-haven flows underpinned it on Thursday. The greenback also received support from jobless claims, which surprised with a drop to 547,000. Markit’s Purchasing Managers’ Indexes for April and New Home Sales figures are eyed in the US session.

Preliminary PMIs stand out in the European session as well, with economists expecting them to fall off their highs despite optimism about Europe’s reopening. The European Central Bank moderately upgraded its views in Thursday’s rate decision, saying that medium-term risks are balanced. EUR/USD is hovering above 1.20.

GBP/USD is licking its wounds around 1.3850 ahead of UK Retail Sales and PMIs. The country is set to reach 50% with one vaccine shot in the coming days.

Bitcoin has tumbled down below $50,000, down some 20% from the peak near $65,000 but still some 80% higher year-to-date. Tax hikes, legal issues and an unfavorable technical situation have been cited as reasons for the extended falls.

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