Daily Market Commentary 26th April 2021

US equity markets rebounded strongly, to close out the week, recovering most of the previous sessions losses. A massive increase in Capital Gains Tax (CGT) in the US shook market confidence, as fear of a hit to trading profits began to sink in. The Biden administration flagged big tax increases for the wealthy, but this was largely ignored, until reality came to bite. This will not be the first or last tax increase, as the massive Government expansion needs to be funded and debt cannot sustain the sheer magnitude of expenditure.

Markets brushed off the fears overnight, as analysts speculated that the tax increases could be negotiated/lobbied away? European and UK PMI showed big increases, signalling a strong economic recovery, as economies re-open. UK Retail Sales jumped 5.4%, boosting the GBP to 1.3880, while the EUR rebounded to 1.2090. The pandemic and inflationary pressures were sidelined in equity markets and confidence spread to the commodity currencies. The NZD rebounded to approach 0.7200, while the AUD pushed back to 0.7750, also encouraged by strong local PMI data.

The coming week will be dominated by speculation surrounding the FOMC meeting and the release of global GDP growth numbers and CPI inflation data. It should be a huge week!