- US stock futures inched higher on Friday after shares and cryptocurrencies stumbled following reports of US tax hikes.
- European stocks trended downwards in anticipation of a flurry of economic data set to be published on Friday.
- Rising COVID-19 cases and tighter lockdown restrictions continue to impact markets.
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US futures edged up on Friday, regaining some stability, after President Joe Biden proposed a sharp increase in capital gains tax for the wealthiest Americans, which hit investor sentiment and triggered a sell-off in cryptocurrencies.
Stock-index futures largely shook off any overnight weakness, but the mood remained cautious. Dow Jones futures rose by 0.2%, whilst S&P 500 futures gained 0.24% and Nasdaq 100 futures inched 0.18% higher.
The tax announcement affected the already shaky markets recovery, Michael Hewson, chief market analyst at CMC Markets, said.
"While one could argue that the prospect of higher taxes is never welcome, and a doubling of a key tax rate even more so, the likelihood of anything of this nature passing through an evenly split Congress, lies somewhere between slim and none, however in these highly uncertainty times it doesn't take much to spook a little bit of profit taking, in what has already been a very choppy week. The reality is taxes may rise but certainly not by as much being touted," Hewson said.
"The turn in sentiment was seen in yields as well, with 10-year US Treasuries higher on the day, as yields fell -1.7bps to 1.538% after been as high as 1.5856% before the news", Deutsche Bank said in a note.
Bitcoin remained below the $50,000 mark, which it broke the previous day for the first time since February. The price was last around $48,193 on Friday in Europe.
"It is clear that bitcoin is more sensitive to capital gains tax threats than most 'asset' classes. The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto's Achilles's heel, in my opinion," Jeffrey Halley, senior markets analyst at OANDA said.
In the United States, cryptocurrencies are treated like property, not currencies, by the taxman.
European stocks fell on Friday ahead of a flurry of economic data. The German DAX was last down 0.3% and the UK's FTSE 100 fell by 0.26%. The pan-European Euro Stoxx 50 was also down, by 0.22%.
Key data to watch out for includes April's flash PMI data as well as the UK's public sector borrowing figure and the country's first-quarter retail sales, which will likely be affected by the lockdown restrictions dominating the first months of the year. Monthly data had shown retail sale declines.
The European Central Bank meeting on Thursday was largely uneventful and did not impact stocks for the most part.
Asian markets seemed largely unaffected by Biden's tax plans. Hong Kong's Hang Seng index closed at 1.28% up, and China's Shanghai composite inched 0.26% higher on Friday.
The Japanese Nikkei 225 however fell 0.57% on Thursday after Tokyo had the highest number of new COVID-19 infections since January on Thursday and a stricter lockdown was suggested for some areas of Japan, which added to economic recovery concerns. Japanese manufacturing data, which was released earlier on Friday, came in strong, but did not offset concerns about continued COVID-19 restrictions.
Oil prices recovered modestly, thanks in part to some lockdown restrictions easing in Europe. WTI crude futures were last up 0.78%, trading at $61.92 a barrel, and Brent crude rose 0.64% to $65.81, breaking a three-day streak of declines.