Asian shares rise despite potential U.S. CGT hike

by Jonathan Adams
Asian shares

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%, Chinese blue-chip shares added 0.93%, Hang Seng rose 0.93% and Kospi advanced 0.1%

A key gauge of Asian shares rose on Friday, supported by gains in China and a decision by the European Central Bank (ECB) to maintain stimulus, while investors largely shrugged off the impact of a possible U.S. capital gains tax (CGT) hike.

Modestly firmer equity markets contrasted with ructions in cryptocurrencies as investors fretted over the impact of tax changes. Bitcoin’s rout deepened, dropping below the $50,000 level to a low of $48,338.37, its lowest level in nearly seven week. Ethereum tumbled nearly 12% before trimming losses, and was down nearly 7% at $2,240.65.

The ECB’s decision to leave policy on hold came despite its preiction of a strong rebound in the euro zone economy from mid-year as coronavirus 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, said Ray Attrill, head of FX strategy at National Australia Bank. 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.

In a hit to stock market sentiment overnight, the Biden administration was reported to be seeking a rise in the CGT to near 40% for wealthy individuals, almost double the current rate. The Dow Jones Industrial Average (DJIA) closed 0.94% lower.

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 MSCI’s broadest index of Asia-Pacific shares outside Japan shook off early small losses to gain 0.3%.

Chinese blue-chip shares added 0.93%, supported by consumer staples, health care and financial firms. Hong Kong’s Hang Seng gained 0.93% and Seoul’s Kospi advanced 0.1%.

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