Asian shares rose on Friday after the European Central Bank left policy unchanged, extending a rebound following a sharp selloff earlier in the week, but gains were capped as investors considered the impact of a possible U.S. capital gains tax hike.
The ECB’s decision to keep copious stimulus flowing came despite its prediction of a strong rebound in the euro zone economy from mid-year as COVID-19 infections are brought under control.
“There were a couple of subtle acknowledgements today that an upgrade to forecasts is likely coming at the June 10 meeting … Lagarde did highlight the pick-up in vaccinations and noted high frequency data are confirming to ECB staff that their previous view of an improvement in the medium-term (is) on course,” said Ray Attrill, head of FX strategy at National Australia Bank.
But in a hit to stock market sentiment overnight, the administration of U.S. President Joe Biden was reported to be seeking an increase in the capital gains tax to near 40% for wealthy individuals, almost double the current rate. The Dow Jones Industrial Average (.DJI) ended down 0.94%.
“The move on the Dow overnight I think needs to be seen in the context that it’s had a remarkable run up,” said James McGlew, executive director of corporate stockbroking at Argonaut. “I don’t think people are completely negative on the fact that those tax changes are being flagged. Ultimately it’s money that will feed back into the economy.”
In Asia on Friday morning MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) shook off early small losses to rise 0.1%.
Chinese blue-chip shares (.CSI300) rose 0.33%, Hong Kong’s Hang Seng (.HSI) rose 0.55% and Seoul’s Kospi (.KS11) added 0.16%.
Japan’s Nikkei stock index (.N225) slid 0.68%.
In the currency market the euro edged up less than 0.1% on the day to $1.2023 after dipping a day earlier. The dollar was slightly lower against the yen at 107.92 and the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, fell 0.07% to 91.217.
The yield on benchmark 10-year Treasury notes was little changed at 1.554% after the capital gains tax reports pulled yields lower on Thursday.
U.S. crude rose 0.6% to $61.80 a barrel and global benchmark Brent crude added 0.47% to $65.71 per barrel.
Spot gold rose about 0.3% to $1,789.18 per ounce.