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Stock Market Today: European stocks rise due to the growth expectations

The wavering in the markets follows one another. The trading day began with caution, and Wall Street’s bearish turn cooled the spirits in Europe. 

The Prospect of higher taxes scares Wall Street and the rest of the market

The European stocks point to a lower opening after the falls seen last night in Wall Street. It followed the aggressive increase in taxes Biden is pursuing. The new Administration intends to double the taxes on capital gains for those citizens with an income greater than one million dollars.

The New York Stock Exchange experienced its worst day of the last five weeks yesterday. It led the S&P 500 to end the session with its biggest fall since March 18, after knowing the intentions of the president of the United States regarding taxes.

Biden wants to tax the rich

The new White House tenant plans to finance the high budget of the stimulus and infrastructure plans announced in recent months with aggressive tax reforms that could double the pressure on higher incomes.

As it became known yesterday afternoon, the Democratic leader aims for taxes on capital gains to double from 20% to 39.6% for those citizens who earn more than a million dollars a year. In practice, this would mean that total rates on returns on capital would reach 52.22% for New York citizens and up to 56.7% for California residents.

As expected, the news has choked investors and has caused the correction seen last night on Wall Street and has also been replicated in the Japan Stock Exchange. The rest of the squares in Asia have managed to remain oblivious to this corrective in the United States. Still, the European markets are not having so much luck, and the main references of the Old Continent are trading with falls of less than a quarter of a point.

However, the day’s schedule includes a whole series of relevant local references, such as a new wave of business results and the composite PMI data for the eurozone. Analysts expect the indicator for April to stand at 52.8 points. 

 

Analysts recommend not to sell in April 

It seems helpful to look at the statistics to see what has happened in the past. We can see how some investment decisions have never made much sense. Only six trading sessions have left until April ends, and investors are already looking to May with uncertainty. 

If we look at what the EuroStoxx 50 has done throughout its history, we see how it has made gains in two out of every three months of April. 

And what happens in May? The truth is that in the last 30 years, losses have been averaged slightly higher than half a percentage point. So, the gains from being invested in April have more than offset the losses that staying with positions taken in May.

The EuroStoxx, since the beginning of April, has only registered a 1% increase compared to the average of 2.3%. However, in general, equities indeed arrive at this time of year with accumulated double-digit returns, which may convince some investors to be cautious and reap those benefits.

Good buying opportunity in the stock market

Ações dos EUA atingiram máximas recordes em 5 de abril

People are usually concerned about May. Analysts believe that this time, there could be a correction that is even an investment opportunity. A reasonably good epidemiological and vaccination scenario has been discounted, taking into account the latest increases in the tourism sector.

If there are falls, it is necessary to take advantage of them to buy because the support of the central banks, the fiscal stimuli, and the expectations of the cycle’s recovery is maintained. 

During the three weeks to April, the most bullish sector in Europe has been consumer discretionary, followed by real estate and basic materials. The latter is also one of the best so far this year. However, the clear winner in 2021 continues to be that of the automobile companies. This sector has seen a rise of close to 20% since January 1.

Chinese shares picked up while the Nikkei closed in Red

Asian shares increased on Friday, boosted by rising Chinese blue-chips and a ruling by the European Central Bank to maintain stimulus. At the same time, investors largely ignored the impact of a possible US capital gains tax hike.

In Asia on Friday, MSCI’s broadest index of Asia-Pacific shares outside Japan shook off early small losses to advance by 0.43%.

Chinese blue-chip shares climbed by 0.51%, supported by green and healthcare stocks. Hong Kong’s Hang Seng gained 0.54%, and Seoul’s KOSPI rose by 0.2%.

Japan indices settled lower

The Nikkei in Tokyo has imitated the corrective with which Wall Street closed yesterday and slid by 0.57%. Declines in the rail and bus, paper and pulp, and real estate sectors pushed the indices lower. 

The Tokyo stock market was weighed down by reports of the intention of the US President Administration to propose an increase in the capital gains tax.

On the other hand, investors worried about the potential impact of the third phase of health emergencies in Japan due to COVID-19. It will affect Tokyo and three other areas of the country, where around a quarter of the population lives and represent a third of its economy.

The session’s best performers on the Nikkei 225 were ANA Holdings Inc, which climbed by 3.38% or 77.5 points to 2,369.5 at the close. It was followed by Odakyu Electric Railway Co., Ltd. with an increase of 2.66%, or 76.0 points, to close at 2,932.0. Central Japan Railway Co. advanced by 2.53%, 385.0 points, ending the session at 15,630.0.

At the bottom of the index was Z Holdings Corp slipping by 3.87%, or 21.0 points, to close at 521.0. Meanwhile, Panasonic Corp yielded 3.47%, 47.0 points, and closed at 1,309.0. Komatsu Ltd. dropped by 3.17%, 103,0 points, ending at 3,148.0.

Reds beat green numbers on the Tokyo Stock Exchange by 2,218 versus 1,278, and 249 were flat.

The Nikkei Volatility, which estimates the volatility of options on the Nikkei 225, settled flat, 0% to 22.56.

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