A taxing Friday
Posted 4 hours agoSharePrint
A wave of risk aversion swept US markets overnight after US President Biden signalled his intention to increase capital gains tax on high-income earners massively. That undid the excellent work of the US weekly Initial Jobless Claims, which unexpectedly retreated for the second week in a row to 547,000. Despite the spike in Covid-19 cases in parts of the US, the jobless claims data suggest that recovery momentum in America continues to accelerate.
Of course, what President Biden wants, and what he will get, could be two totally different things, especially when it comes to tax rates. Goldman Sachs suggests the tax hike will be watered down to 28% from above 40%, an entirely reasonable conclusion. Although the major US indices retreated by around 1.0% as the story hit the major wires, already in Asia, US stock index futures are staging a recovery, suggesting the knee jerk is running out of steam already.
US stimulus hopes vaccinate bull markets
December 16, 2020SharePrint
Equity markets rise on stimulus hopes
Equity markets shrugged off a previous run of losses, and the US dollar weakened overnight, despite weaker US data. Rising hopes that US stimulus negotiations were making progress, with the two-part latest incarnation appearing more palatable to both sides, stopped the multi-day retreat in its tracks. The price action overnight emphasising that a positive outcome to the bi-partisan talks and, to a lesser extent, the USD1.4 trillion government funding bill are trumping even the FOMC meeting in importance.
Lawmakers may have been given another nudge overnight to get something done, with the New York Empire State Manufacturing Index, and US Industrial Production data disappointing. That follows a series of disappointing weekly Initial Jobless Claims and Non-Farm Payrolls data suggesting that Covid-19’s rampage across America is undermining the economic recovery.