Europe midday: US tax rise reports keep investors in check


European markets remained muted on Friday as investors kept a wary eye on the Covid-19 surge in India and reports of broader US tax rises, despite positive manufacturing surveys in the Euro zone.

The pan-European Stoxx 600 index was down 0.4%. The UK’s FTSE 100 was off 0.51% after public sector borrowing figures revealed the extent of government support measures to protect the economy from the pandemic.

“The escalation of the pandemic in India and reports of planned tax hikes in the US are keeping the lid on market exuberance,” said interactive investor head of markets Richard Hunter.

“With the situation also worsening in the likes of Brazil and Japan amid the discovery of new variants, and quite apart from the human cost, sentiment has been dented by the possible impact on demand for and supply of commodities in particular.”

In the US, reports suggested the Biden administration was looking at capital gains and income tax rises, in addition to a possible hike in corporation tax.

Investors were also looking ahead to quarterly updates from the major FTSE100 sectors of banks, oils and pharmaceuticals.

Euro area manufacturing and services activity showed a surprising rebound in April, growing at pace not seen since last July, the results of two key surveys revealed.

Based on preliminary results, IHS Markit’s composite output index for both sectors rose from a reading of 53.2 for March to 54.7 in April (consensus: 53.3).

The Purchasing Managers’ Index for services meanwhile rose from 49.6 to 50.3 (consensus: 49.6).

In the UK, state annual borrowing hit a high not seen since the aftermath of the second world war the pandemic forced soaring government spending to prevent an economic meltdown, official figures showed, while British retail sales soared 5.4% in March.

The Treasury borrowed £303.1bn in the year to the end of March, the Office for National Statistics said in its first estimates for the public finances.

The figure was £246.1bn more than the previous year and was equal to 14.5% of national output. The last time borrowing as a share of GDP was higher was in 1946 when the figure was 15.2%.

In equity news, Daimler shares rose as the car maker upped its profit forecasts for 2021, but warned the global shortage of semiconductor chips may continue to weigh on second-quarter sales.

SAAB shares topped the index as the company held full-year guidance after reporting an unexpected rise in first-quarter net profit as strong military orders offset the continued downturn in its civil-aviation business.

The Swedish defense company said net profit for the quarter rose to 392 million Swedish kronor from SEK334m, as sales rose 13% to SEK9.09bn.

Swedish private bank SEB climbed 6.2% after a strong first-quarter earnings report, while Italian fashion company Moncler dropped 6% after its results.

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