Daily market review

United States

A Bloomberg report that the Biden administration wants to double capital gains taxes for high-income earners knocked stocks down Thursday. The Dow Jones industrial average, the S&P 500 and the NASDAQ all fell 0.9 percent.

Like Bloomberg, the New York Times reported that Biden is planning to raise capital gains taxes as part of efforts, well-advertised during the presidential campaign, to boost tax rates for wealthy Americans to pay for child care and education. Market jitters about other measures coming from the Biden administration, including possible curbs on crypto-currencies, added to the risk-off tone.

Reopening stocks also suffered from negative Covid-19 headlines, including surging case counts in Asia and slowing US vaccination rates. Meanwhile, on a busy earnings day, stay-at-home stocks like housing, appliances, food delivery, and outdoor recreation showed strong results and tended to outperform. In the latter category, Pool Corp, the residential pool business, rose 6.4 percent after a big earnings beat and better 2021 guidance. AT&T was another winner, up 4.2 percent, on strong quarterly results, paced by its WarnerMedia home entertainment business.

Most sectors sold off, with materials lagging on weakness in metals and chemicals makers, including Dow Chemical, down 6.0 percent. Energy slipped on a selloff in integrated energy stocks, including Exxon Mobil, down 1.3 percent. Tech stocks slipped on weakness in chipmakers, and in Apple, down 1.2 percent, and Microsoft, down 1.3 percent. Banks depressed financials and mega-cap internets slipped. Industrials held up relatively well.

In macro news, US initial unemployment claims unexpectedly fell a further 39,000 to 547,000 in the week ended April 17, below Econoday's consensus forecast of 615,000, with estimates ranging from 576,000 to 670,000. Separately, higher prices along with higher mortgage rates that have since come down made for a 3.7 percent monthly decline in existing home sales in March to an annual rate of 6.010 million.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 55 cents to US$65.54 while spot gold fell US$10.91 to US$1,783.39. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield declined 2 basis points to 2.24 percent and the 10-year note yield was flat at 1.55 percent.


Wednesday's rally on Wall Street and mostly higher Asian markets continued Thursday in Europe, with help from positive earnings. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX gained 0.8 percent, the French CAC rose 0.9 percent, and the FTSE-100 was up 0.6 percent.

Among sectors, utilities, food and beverage, and technology fared best while lagging were financial services, telecom and insurance. UK travel stock perked up on news the UK will certify travelers who have been fully vaccinated.

Among stocks in the news, UK construction company Morgan Sindall rose 9.5 percent after raising its guidance. SAP, the German software giant, rose 3.4 percent on strong quarterly results. Nestle, the Swiss food conglomerate, rose 3 percent on a revenues beat. Volvo, the Swedish automaker, rose 2.9 percent on an earnings beat. Ryanair, the UK airline, rose 3.6 percent on the UK travel certification news.

In macroeconomic news, the ECB announced no changes to policy, as expected. Net purchases under the asset purchase program (APP) remain at €20 billion a month and the ceiling on the pandemic emergency purchase program (PEPP) at €1.85 trillion. Consumer confidence in the Eurozone has improved sharply this month, up 2.7 points to a minus 8.1 level that's the best since minus 6.6 in February last year and the first reading since the pandemic began above the index's long-term average of minus 10.6.

Asia Pacific

Mostly following Wednesday's US markets, Asian equities were higher Thursday on recovery hopes. Japan rebounded from three days of losses, while Australia was up and Chinese markets were split with coronavirus worries and geopolitical factors also in focus. India's disastrous surge in Covid-19 cases and concerns about case counts in Japan, Korea, and Singapore weighed on sentiment.

Chinese markets were hurt by movement in US Congress toward new sanctions against the country, and on China's worsening relations with Australia after the latter canceled its Belt & Road plans. Shanghai's composite and the CSI 300 both declined 0.2 percent while the Hong Kong Hang Seng index rose 0.5 percent.

For mainland stocks, most sectors declined with only telecom better, while industrials and consumer staples weakened. Hong Kong was paced by technology stocks, including Meituan, up 3.5 percent, and on the downside by Geely Automobile, down 1.8 percent.

Japanese markets built on Wednesday's US gains, with the Nikkei up 2.4 percent and the broader Topix index up 1.8 percent following steep declines in the first part of the week. Growth stocks beat value, with almost all sectors higher. Marine transport topped the winners, followed by iron & steel, and banks.

Australian shares advanced with the All Ordinaries index up 0.7 percent. Gains were nearly across the board with health care up on gains in biotech and buy-now-pay-later stocks lifting tech. Industrials rose on strength in airlines and transport, and banks supported financials. Retailers held down consumer discretionary.

Looking ahead*

On Friday in Asia/Pacific, Japanese CPI and Japanese PMI composite flash figures are due, plus Singapore CPI. In Europe, UK retail sales, UK public sector borrowing, plus PMI composite flashes from France, Germany, Eurozone, and UK are scheduled. In North America, the following reports are on tap: US PMI composite flash and US new home sales.

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