Stocks tumble on tax hike and tapering fears
|The rally train appears to be slowing down, with Boris Johnson’s plans to raise NI rates building on the theme of monetary tightening seen in recent months. Tomorrow sees the ECB come back into play, with Lagarde likely to cut asset purchases.
-
European markets tumble, with rising US Delta cases unlikely to reverse tightening trajectory.
-
ECB comes into focus, with Lagarde expected to trim the asset purchase scheme.
-
UK tax hike highlights need to cut the huge pandemic deficit.
Another day of losses look to be on the cards if early European price action is any guide, with widespread losses bringing the DAX into a one-month low. UK plans to raise taxes, coupled with a gradual transition towards tighter monetary policy serve to highlight how the focus is likely to shift towards withdrawing and paying for stimulus rather than implementing new support measures. The theme of monetary withdrawal comes up once again tomorrow, with the ECB providing yet another opportunity to highlight how the current direction of travel is being driven by the hawks. As such, it comes as no surprise to see caution ahead of an ECB meeting that could see Lagarde & co trim their bond buying programme. While Friday’s US non-farm payrolls figure did raise hopes of a potential delay to tapering, the recent rise in US 10-year yields highlight how markets see rates rising before long.
This week has seen Boris Johnson provide a timely reminder that the seemingly one-way traffic of increased spending and financial support was always likely to ultimately result in higher taxes as the Treasury seek to cut the deficit built up over the year. Despite a manifesto vow to avoid raising any major tax rate, the pandemic has arguably provided an acceptable platform to raise funds via the 1.25% National Insurance hike proposed by the government. Today sees parliament vote on the proposition, and while there has been some Tory opposition, it looks likely the £12 billion boost to the NHS coffers will be pushed through. Investors and business owners are also taking an additional hit, with plans to apply a 1.25% tax on dividend payments from April 2022.
Ahead of the open we expect the Dow Jones to open 120 points lower, at 34,980.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.