Following losses on Wall Street where major indexes shed around 1% amid a report that President Joe Biden will propose raising taxes on wealthy investors, European stocks are trading marginally lower on Friday. As such, regional stocks are on track for their first weekly loss in eight. Biden’s tax plan would raise the capital gains tax to 39.6% for investors who make more than $1 million.
On the positive side, the Labor Department reported the number of Americans applying for unemployment benefits fell again last week to its lowest level since the pandemic began. As for the European data, the Eurozone manufacturing PMI improved from 62.5 in March to 63.3 in April and beat 62.0 expectations. Furthermore, the gauge hit the highest since June 1997. Services PMI jumped to eight-month highs of 50.3 in April versus 49.1 expected and 49.6 last. French and German manufacturing PMI numbers came in better than expected as well, while U.K. retail sales jumped 5.4% on the month in March.
On the negative side, India reported the world's highest daily tally of coronavirus cases for a second day and Japan was set to declare states of emergency for Tokyo, Osaka and two other prefectures. Elsewhere, the ECB Survey of Professional Forecasters for the second quarter of 2021 showed a downward revision to the real GDP expectations for this year and upward in 2022, implying a further delay in recovery. Against this backdrop, the FTSE 100 in London sheds 0.33% to 6,915, Italy’s FTSE MIB gains 0.14% to 24,364, France’s CAC 40 is down by 0.14% to 6,258, while the German DAX 30 loses 0.40% to 15,259. US stock index futures are marginally higher, suggesting stocks could see a recovery later in the day.
In currencies, the greenback is back on the defensive following short-lived rally witnesses on Thursday. EURUSD briefly dipped below 1.2000 to reverse losses and climb back to the 100-DMA in recent trading. Still, the common currency lacks momentum to overcome this barrier despite a weaker dollar in combination with strong economic data out of the Eurozone. The pair was last seen trading around daily highs in the 1.2060 area, with the immediate resistance coming at 1.2080.
Nathan Lambert, Head of Global FX Analytical Department