Biden tax plan weighs on US stocks, Asia mixed

Asian equity markets mixed after Biden tax proposals

US equity markets fell overnight after President Biden signalled he wished to increase capital gains tax for high-income earners. Still, it is entirely reasonable that Biden will have to compromise on his proposal that calls for a tax hike of over 40%.

The S&P 500 fell by 0.92%, while the Nasdaq and Dow Jones retreated by 0.94%. The reaction appeared more knee-jerk than structural, very much in keeping with the wax-on, wax-off price action that has defined the week’s price action. US index futures have risen by around 0.20% in aftermarket trading, limiting the fallout in Asia.

The Nikkei 225 is down 0.80%, retail investors chasing their tails once again, and the start of Covid-19 restrictions also weighing on sentiment. The Kospi is up just 0.10%, while Taipei has climbed by 0.40%. Mainland China markets are also green; the Shanghai Composite has risen 0.20%, while the CSI 300 has leapt by 0.80%, with the Hang Seng 0.85% higher. The South China Morning Post reported yesterday that bearish short positions had reached a record high on the Shanghai and Shenzhen exchanges, so there may be a hint of an end-of-week short-squeeze occurring today.

Across Asia, Singapore has fallen 0.40% this morning, but Kuala Lumpur and Jakarta are 0.10% higher as regional markets ease into the end of the week. In Australia, the ASX 200 and All Ordinaries are lower by just 0.20%, with Westpac upgrading employment and, notably, bringing the RBA tapering timing forward, seemingly weighing modestly on local markets.

Asia’s reluctance to blindly follow the US overnight move south today suggests that the Biden tax fears remain overblown. With the week defined by noisy range trading, regional investors appear content to await the heavyweight data calendar emerging over the next two weeks, for more concrete signs of direction. Covid-19 nerves around India, Japan and Thailand, along with new cases in Singapore, also give local investors reasons to pause and await developments.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)