LONDON MARKET MIDDAY: Stocks fall on Biden hike to capital gains tax

Fri, 23rd Apr 2021 12:18

(Alliance News) - Stock prices in London remained lower at midday on Friday after US President Joe Biden was reported to be planning a sharp increase in capital gains tax for affluent Americans.

According to Bloomberg, the Biden administration is developing a plan to slap new levies on wealthy investors, including a near doubling of the tax on stock transaction profits to 39.6% for people earning more than USD1 million.

Any tax plan faces a long process on Capitol Hill before becoming a reality, but analysts said the reports indicate hikes are very much in the mix in Washington.

Biden previously had called for an increase in corporate taxes to finance his USD2 trillion infrastructure package.

The FTSE 100 index was down 36.30 points, or 0.5%, at 6,901.38 midday Friday and is on track to end the week 1.1% lower.

The mid-cap FTSE 250 was down 96.17 points, or 0.4%, at 22,268.80. The AIM All-Share index was down 0.3% at 1,260.35.

The Cboe UK 100 index was down 0.6% at 686.91. The Cboe 250 was down 0.4% at 19,904.59. The Cboe Small Companies was 0.1% lower at 14,392.64.

In mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were down 0.3% and 0.2%, respectively.

"European markets are on the back foot in early trade, with valuations taking a dive in the wake of Joe Biden's proposal to implement a near 50% stamp duty rate on high earners. With the past year having seen traders react with glee over repeated bouts of stimulus, traders are gradually seeing the uncomfortable truth that those debts have to be paid one way or another," said IG analyst Josh Mahony.

"Quite whether Biden manages to garner enough support to pass this bill remains to be seen, with the president likely to require almost unanimous support from the Democrats given the expected widespread rejection from the GOP," Mahony added.

In the FTSE 100, Informa was down 1.3%, extending Thursday's 2.1% slide. The exhibitions and business information publisher had reported a swing to annual loss due to event cancellations, but pointed to a recovery in 2021 as the global vaccination rollout continues.

National Grid was 1.3% lower. The utility has hired banks for the sale of a majority stake in its gas grid business, turning to the advisers that last month helped seal its biggest-ever acquisition, Bloomberg reported.

Bloomberg said Barclays, Goldman Sachs and Robey Warshaw will assist the London-listed utility on the sale of a stake that could be valued at up to GBP5 billion. The banks have been helping National Grid with internal preparations for the sale, with a formal process yet to begin.

In the FTSE 250, FirstGroup was still the best performer at midday, up 8.8%. The transport firm said it has agreed to sell its US bus operations to Swedish private equity firm EQT for up to GBP3.3 billion, putting shareholders in line for a payout.

FirstGroup will sell school bus operator First Student and passenger service provider First Transit to EQT Infrastructure. The GBP3.3 billion headline enterprise value includes an earnout of up to GBP170 million for First Transit.

FirstGroup is looking to refocus on its UK home market and said it will have a "cash generative operating model that will support an attractive dividend". The company is continuing to pursue all exit options for its Greyhound unit, which runs intercity coach services in the US.

Fellow UK bus and train operators National Express and Stagecoach were up 1.9% and 2.0%, respectively, in a positive read-across.

Workspace was the worst mid-cap performer, down 5.5%, after Barclays double downgraded the flexible office provider to Underweight from Overweight.

The pound was quoted at USD1.3880 at midday on Friday, up from USD1.3838 at the London equities close Thursday, following positive UK economic data.

UK private sector activity surged in April as Covid-19 restrictions were loosened, providing a platform for a "bumper" second quarter, IHS Markit said.

The flash IHS Markit-CIPS UK services purchasing managers' index print jumped to 60.1 points in April, from 56.3 in March and signalled the fastest pace of expansion since August 2014.

The UK flash manufacturing PMI read 60.7 points in April, up from 58.9 in March and beat the market estimate of 59.0. In addition, the April figure was the highest since July 1994.

The UK composite flash PMI score was 60.0 in April, up from 56.4 in March and well above the market forecast of 58.2.

In addition, UK retail sales grew by more than expected in March as consumers looked ahead to an easing of lockdown restrictions, according to the latest figures from the Office for National Statistics.

On an annual basis, UK retail sales increased 7.2% in March, rebounding after falling 3.6% in February. The latest figure beat the market forecast, cited by FXStreet, for a 3.5% rise. On a monthly basis, retail sales grew 5.4% in March following a 2.2% rise in February. The month-on-month print beat market consensus of 1.5%.

"These numbers will bolster hopes that the economy should now recovery rapidly on the back of the fast vaccine roll-out and lockdown easing," Rupert Thompson, chief investment officer at Kingswood said.

The euro was priced at USD1.2054, up from USD1.2014. Against the yen, the dollar was quoted at JPY107.88, down from JPY108.11.

PMI readings showed eurozone business activity grew in April at the fastest rate since last July.

The headline Markit eurozone composite purchasing managers' index rose to 53.7 points in April from 53.2 in March. The figure remained above the 50.0 mark which separates expansion from contraction.

Manufacturing output grew for a tenth straight month, expanding at a rate unsurpassed in over two decades of survey history, data showed. Eurozone manufacturing PMI increased to a record high of 63.3 points in April from 62.5 in March.

The service sector, meanwhile, continued to lag, principally reflecting further efforts to contain the spread of Covid-19 in many member states. The eurozone services PMI activity index stood at 50.3 points in April, up from 49.6 in March.

Brent oil was trading at USD65.37 a barrel Friday at midday, down from USD65.58 at the London equities close Thursday. Gold was quoted at USD1,786.11 an ounce, slightly higher against USD1,782.29.

US stock market futures were set to rebound marginally after a steep fall on Thursday, after news of the Biden tax plans broke late Thursday.

The Dow Jones Industrial Average, S&P 500 and the Nasdaq Composite were all called up 0.1%.

Intel shares will be in focus after the world's largest chipmaker late Thursday revealed a drop in revenue and earnings for the first quarter of the year, with its results hit by a patent infringement case ruling.

Intel shares were 2.7% lower in pre-market trade in New York. Shares in fellow semiconductor firms Nvidia, Qualcomm, Texas Instruments and Analog Devices were flat .

Next week, tech earnings season gets underway with Tesla, Google, Apple and Amazon among those reporting in the US.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com