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European stocks on track for first weekly loss

Stocks in Europe were on track for their first weekly loss in eight as investors assessed the impact of a possible U.S. CGT hike

European stocks were on track for their first weekly loss in eight and Bitcoin hit its lowest in nearly seven weeks on Friday as investors assessed the impact of a possible U.S. capital gains tax hike.

President Joe Biden will roll out a plan to raise taxes on the wealthiest Americans, including the largest-ever increase in levies on investment gains, to fund about $1 trillion in childcare, universal pre-kindergarten education and paid leave for workers, sources familiar with the proposal said.

Biden’s administration is seeking an increase in the capital gains tax to near 40% for wealthy individuals, almost double the current rate, the sources said.

The devil is always going to be in the detail, said Ned Rumpeltin, European head of currency strategy at TD Securities, adding that the Democrats’ narrow majority could make the proposals hard to pass.

The pan-European STOXX 600 shed 0.4% and was on course for a 1% weekly decline, with a surge in global Covid cases also weighing.

S&P futures added 0.25%, however, after the Dow Jones Industrial Average closed nearly 1% lower on the tax proposal.

Bitcoin fell below the $50,000 level to its lowest level in nearly seven weeks, before recovering some ground to trade at $49,350, down 4.5%. Ethereum fell 6.5% at $2,250.

World stocks were flat on the day and down 0.9% on the week after reaching record high close to 3,000 on Monday.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.65%, however, with Chinese blue-chip shares rising 0.91%, supported by green and healthcare stocks. Japan’s Nikkei stock index dropped 0.57%.

I don’t think people are completely negative on the fact that those (U.S.) tax changes are being flagged, said James McGlew, executive director of corporate stockbroking at Argonaut. Ultimately it’s money that will feed back into the economy.

The euro zone economy will grow more slowly this year than earlier thought and a temporary gain in inflation is likely to exceed a previous projection, a European Central Bank survey showed on Friday, a day after the bank left policy unchanged.

However, IHS Markit’s flash Composite Purchasing Managers’ Index for the euro zone, seen as a good guide to economic health, rose to a nine-month high of 53.7 in April, confounding expectations in a Reuters poll for a dip to 52.8. Anything above 50 indicates growth.

The euro zone has enjoyed a record manufacturing boom this month as the continent sees its early stages of the recovery efforts reaping rewards, said Mihir Kapadia, CEO of Sun Global Investments, in a client note. We could expect some hiccups along the way, but sentiment should remain higher for some time.

The euro added 0.3% on the day to $1.2052 after tumbling a day earlier, within sight of a seven-week high hit earlier this week.