Stocks pinned near record highs as markets digest U.S. jobs data, global
tax deal
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[June 07, 2021] By
Ritvik Carvalho
LONDON (Reuters) - World shares were
rangebound and trading just off record highs on Monday as markets
digested Friday's disappointing U.S. jobs report and a global tax deal
between the G7 group of countries, while also looking ahead to inflation
data due this week.
Investors were wary about how shares of major tech firms would react to
the G7's agreement on a minimum global corporate tax rate of at least
15%, although securing approval from the whole G20 could be a tall
order.
The early reaction was muted, with Nasdaq futures down 0.4% and S&P 500
futures down 0.2%.
"I would assume that it (the tax deal) is not helping the market in the
sense that these Internet giants are going to be taxed more ... it has
an impact on sentiment in equity markets, but the reality is, it has
already been priced in," said Sebastien Galy, senior macro strategist at
Nordea Asset Management.
"So even though equity markets in the U.S. are under pressure on the
futures side, I'd expect it not to last till the end of the day."
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European shares as measured by the pan-European STOXX 600 index hit a
fresh record high after being pulled lower at the open by commodity
shares. [.EU]
MSCI's All-Country World index, which tracks shares across 49 countries,
traded just below record highs and was flat on the day by midday in
London.
"With falling effective corporate tax rates (from 31% to 13% currently)
accounting for over 30% of U.S. corporate profit growth since the turn
of the century, companies will have to increasingly rely on margin
expansion and revenue growth just to maintain the recent pace of profit
growth," said Norman Villamin, CIO of wealth management at UBP.
Villamin cautioned however that drivers of a new round of margin
expansion are not appearing on the horizon, suggesting that
stock-picking "should grow increasingly valuable looking ahead".
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.05%
and risked a fourth session of losses. Japan's Nikkei edged up 0.3% and
touched its highest in almost a month.
Taiwan stocks lost 0.4% as a spike in COVID-19 cases hit three tech
companies in northern Taiwan, including chip packager King Yuan
Electronics.
While the 559,000 rise in May U.S. jobs missed forecasts it was still a
relief after April's shockingly weak report. The jobless rate at 5.8%
showed there was a long way to go to reach the Federal Reserve's goal of
full employment.
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![](../images/060721pics/busine29.jpg)
A man wearing a protective face mask, following an outbreak of the
coronavirus, talks on his mobile phone in front of a screen showing
the Nikkei index outside a brokerage in Tokyo, Japan, February 26,
2020. REUTERS/Athit Perawongmetha/File Photo
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Attention will now turn to the U.S. consumer price report on Thursday where the
risk is of another high number, though the Fed still argues the spike is
transitory.
Investors are also watching the tussle over U.S. President Joe Biden's proposed
$1.7 trillion infrastructure plan with the White House rejecting the latest
Republican offer.
The European Central Bank will hold its policy meeting on Thursday and is widely
expected to maintain its stimulus measures, with tapering a distant prospect.
"With a fiscal and monetary tailwind, a cyclical recovery in corporate revenue
growth and margins appears likely looking ahead," UBP's Villamin said.
Yields on U.S. 10-year notes were a fraction higher at 1.58%, after diving 7
basis points on Friday and back to the bottom of the trading range of the last
three months.
That drop, combined with an improvement in risk appetite, put the dollar on the
defensive. It was last at 90.202 against a basket of currencies, having slipped
from a top of 90.629 on Friday.
The euro was holding at $1.2155, after bouncing from a three-week trough of
$1.2102 on Friday, while the dollar was back at 109.43 yen from a peak of
110.33.
The pullback in the dollar helped gold steady at $1,885 an ounce, up from a low
of $1,855 on Friday. [GOL/]
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Oil prices ran into profit-taking after Brent topped $72 a barrel for the first
time since 2019 last week as OPEC+ supply discipline and recovering demand
countered concerns about a patchy global COVID-19 vaccination rollout. [O/R]
Brent slipped 0.6% to $71.48 a barrel, while U.S. crude eased 0.5% to $69.26.
(Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney;
Editing by Jason Neely and Catherine Evans)
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