The US market was shaken yesterday by Joe Biden's plans on taxation. While they were trading around the equilibrium, indexes fell after a Bloomberg article leaked information on the intentions of the US president. The Dow Jones, the S&P 500 and the Nasdaq 100 lost about 1%. We are not talking about a 3 or 4% drop, but the movement was still brutal during the session.

Joe Biden proposed a doubling of the capital gains tax, which would reach 39.6%, and even 43.4% when taking into account the extra taxes already in place. This rate would only apply to individuals with an annual income in excess of $1 million. Subsequent rumors have suggested that the money will be spent on education and children's services more broadly.

An official announcement is expected next week. Could the U.S. administration have leaked some information to test the impact of these measures on the public and the financial markets? Controlled leaks are part of the political arsenal.

This tax tightening, for the moment hypothetical, has been perceived as potentially damaging to the valuation of certain rock'n'roll segments of the market, which explains the sharp declines in some technology stocks and crypto-currencies. Well, we still have to get the new crypto-currencies to pay up, which will be no easy task.

The increase in taxes in the United States is far from a surprise, but there is a world of difference between discussing this possibility and making it official. The reasoning behind this tax reform is that there is a growing concern among the public that markets are calling the authorities to the rescue every time there's an economic crisis, asking them to pour in massive amounts of public money, then make big gains on financial markets to leave it to others to pay off the debts. Will the Biden administration be able to do better this time? That remains to be proven.

This episode almost makes us forget the commitments made by the United States against global warming yesterday. The White House has planned to reduce the country's CO2 emissions by more than 50% compared to 2005 by 2030, with a view to achieving carbon neutrality by 2050. The plan also includes financial support measures for developing countries that want to go down this path as well. Other major countries have strengthened their commitments, even Brazil. Greta Thunberg finds this insufficient, but the WWF has welcomed "a new breath of fresh air". On markets, the players of the ecological transition, out of fashion for a few weeks, have taken their revenge: wind turbine suppliers Vestas and Siemens Gamesa, hydrogen specialists NEL and Scatec or operators of ENR production parks such as EDP Renovaveis and Orsted have gained more than 5%.

Finally, yesterday's ECB meeting brought little news, as expected. Christine Lagarde was at pains to explain that there is no need to discuss, for the time being, how her organization will reduce the size of the PEPP, the asset purchase plan put in place to offset the effects of the pandemic. The ECB has nevertheless suggested that the available data points to an economic recovery, even if the very short-term signals are still weak. As economists were sensing, the next meeting, scheduled for June 10, should be richer in indications.

Today's session is still dominated by corporate earnings reports.

 

Economic highlights of the day

The main macroeconomic publication of the session concerns many countries, since it is the April PMI indicators of major economies, giving a good indication of the morale of corporate purchasing managers in different regions of the world. New home sales figures are also expected.

The euro and the dollar are neutralized at EUR 0.8296. The ounce of gold is trading around USD 1787. Oil is down slightly, at USD 61.6 for U.S. light crude WTI and USD 65.52 for North Sea Brent. The yield on U.S. debt is at 1.56% over 10 years, virtually unchanged. Bitcoin fell just below USD 50,000 early this morning.

 

On markets

* Intel raised its annual revenue forecast on booming demand for computers, but its performance in data center chips and its second-quarter profit forecast failed to convince the market. The stock lost nearly 3% in pre-market trading.

* The European Commission finalized a new agreement with Pfizer and BioNTech to supply up to 1.8 billion additional doses of their COVID-19 vaccine, a European official said.

* American Express reported better-than-expected quarterly earnings thanks to more than $1 billion in provision reversals, but the stock still fell 2.7% in premarket trading.

* Honeywell raised its full-year revenue and profit outlook and posted better-than-expected first-quarter profit, thanks to strong demand for warehouse automation equipment from customers like Amazon.

* Snap on Thursday reported better-than-expected revenue and new users for its Snapchat app despite a slowdown in North America. The stock is up 5.5% in pre-market trading.

* Mattel gained 6.3% in pre-market trading after reporting record quarterly sales growth and raising its full-year revenue guidance.

* Silicon Laboratories is up 14% in pre-market trading after announcing the sale of its infrastructure and automotive businesses to Skyworks Solutions for $2.75 billion in an all-cash deal, as the semiconductor maker refocuses on the Internet of Things market.