US equities weaker Thursday, S&P fell 0.9%, giving back the gains seen Wednesday. Weighing on sentiment: a Bloomberg report suggesting the US President considers an almost-doubling of capital gains taxes for high-income individuals. US10Y yields down 2bps to 1.54%

Of course, this isn’t really “news.” Actually, wait — it is news, but it’s not new.

Analysts have inked an encyclopedia of research over the past year (give or take) about a capital gains tax hike under Biden and the prospect for tax-related selling to front-run it. (back in October, for example,) And past instances of tax-related selling around capital gains tax hikes suggest any equity weakness is likely to be short-lived.

The Biggest problem might be a near-term liquidity drain as active traders and hedge funds pull back on a high-frequency activity to reevaluate strategy. But this should be a temporary speed bump.

Little news from the ECB’s press conference overnight, and the policy statement was more or less unchanged. However, the meeting was described as an “intermediate assessment” of the faster PEPP purchases currently underway, raising the possibility of an intra-quarter decision. Also, some dovish comments consistent with the need for a ‘conscious decoupling’ between an eventual slowing of PEPP purchase pace and tapering. But it’s certainly holding the Euro bulls at bay.

Oil Markets

While discretion is the better part of valour when navigating these choppy oil markets, but with the Covid headline shockers from India and Japan fading to the back burner and so far no related risk of mutations spilling back into the US and Europe, buy-in dip has remained the order of the day.

And with positioning much cleaner, I think the throughput read with broader oil markets downside volatility looking rather unperturbed is the EU “catch up play” with France reopening and improved EU vaccine distribution as traders then recommence to the long position build for US summer driving season.

And while refining runs provided some negative eye candy this week, given the strength in US refining margins and seasonal tailwinds, we should expect them to bounce back over the coming weeks.

Published by Stephen Innes Global Chief Market Strategist AXI