Biden Softens Tax Proposal Aimed at Profitable Companies That Pay Little
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President Biden's proposed 15% minimum tax on profitable corporations would affect far fewer companies than the version he campaigned on, according to details the Treasury Department released Wednesday. The tax -- aimed at companies that report large profits to investors but low tax payments -- would apply only to companies with income exceeding $2 billion, up from the $100 million threshold used during the campaign. The Biden plan would now also let companies subject to the tax get the benefit for tax credits for research, renewable energy and low-income housing. The result is that just 180 companies would even meet the income threshold and just 45 would pay the tax, according to administration estimates that assume the rest of the administration's plan gets implemented. Nearly 1,100 U.S.-listed companies would meet the $100 million threshold, according to S&P Global Market Intelligence. The tax "is a targeted approach to ensure that the most aggressive tax avoiders are forced to bear meaningful tax liabilities," the Treasury Department said in a new report. That plan includes raising the corporate tax rate to 28% from 21%, changing several key features of the 2017 tax law and rallying the world for minimum tax rates on corporate income. "It changes the game we play," Treasury Secretary Janet Yellen said of the tax plan.
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Smaller profit-taking characterized trading on the Swiss stock market in midweek. Traders reported quiet business in the shortened week after Easter. The SMI lost 0.5 percent to 11,128 points. Lafargeholcim gained 0.7 percent after Morgan Stanley raised its price target by 1 franc to 65 francs and reiterated its "Overweight" recommendation. Novartis, however, lost 1.3 percent. JP Morgan recommended the stock at "underweight." The medium-term consensus estimates are too high, says JPM analyst Richard Vosser. Roche, which analyst Vosser rates as "Neutral," fell 1.0 percent. Analysts at Jefferies also justified their "underperform" rating for ABB (-1.0%) with consensus estimates that are too high, even though they raised the price target to 23 from 19 francs. A positive comment from Citigroup did not save Richemont (-1.5%) from profit taking.
European equity markets ended mixed on Wednesday as investors took note of better-than-expected PMI numbers in France and Germany, and as the pace of vaccination campaigns remains a concern in Europe. The European Medicines Agency (EMA) announced Wednesday that it had established a possible link between AstraZeneca's Covid-19 vaccine and the occurrence of very rare cases of blood clots, but that the benefits of the vaccine continued to outweigh the potential risks. The Stoxx Europe 600 index fell 0.2% to 434.3 points. In Paris, the CAC 40 and the SBF 120 finished at the balance. In Frankfurt, the DAX 30 was down 0.2%, while the FTSE 100 in London gained 0.9%. EDF jumped 10.5%, following press reports of a potential buyout of minority stakes by the state. According to the Reuters agency, which cites several trade union sources, the State estimates at 10 billion euros the amount it would have to pay to buy back the minority shareholdings as part of the reorganization project of the energy group. "A possible buyout of minority shareholders is interpreted by the market as a positive signal on the progress of the reorganization of EDF," said Xavier Regnard, analyst at Bryan, Garnier & Co. Amundi (+2.9%) has entered into exclusive negotiations with the bank Société Générale (+0.1%) to buy its subsidiary Lyxor, the two companies announced Wednesday in separate press releases. This acquisition would be based on a cash price of 825 million euros. The transaction provides that Societe Generale retains some of Lyxor's activities, namely structured management for clients of the bank's market activities as well as asset management activities dedicated to savings and carried out on behalf of Societe Generale.
The New York Stock Exchange ended indecisively on Wednesday, however, allowing the S&P 500 index to set a new record, after confirmation that the Federal Reserve (Fed) would maintain an accommodating monetary policy to accompany the recovery. The Dow Jones Industrial Average (DJIA) ended up 0.05 percent at 33,446.26 points. The broader S&P 500 Index gained 0.2 percent, ending at a new record high of 4,079.95 points. The Nasdaq Composite finished down less than 0.1% at 13,688 points. In an effort to reassure Chinese consumers about recent safety concerns, Tesla (-3%) announced Wednesday that the cameras in its vehicles were not activated outside North America. The statement came as the U.S. automaker seeks to further reassure consumers about data security after Beijing decided in March to restrict the use of Tesla cars by military personnel or employees of major state-owned companies, citing fears of data leaks and national security risks. Beyond Meat (-2.7%) will open its own production facility in China, the plant-based meat company announced Wednesday. The head of the largest U.S. bank believes the U.S. economy is emerging from the coronavirus pandemic with a boom that could last until 2023. In his annual letter to JPMorgan Chase (+1.6%) shareholders released Wednesday, the banking group's CEO Jamie Dimon said strong consumer savings, expanding vaccine distribution and the Biden administration's proposed $2.3 trillion infrastructure plan could lead to a "Goldilocks scenario" for the U.S. economy - characterized by rapid, sustained growth accompanied by slowly rising inflation and interest rates.
The East Asian stock markets are mainly on the rise on Thursday. The most action in Hong Kong, where it is up by nearly 1 percent. In the other places little changes after inconsistent guidance from Wall Street. Japan's Nikkei-225 is the tail end with a minus of 0.3 percent to 29,590 points. In Seoul, participants report small profit-taking after the Kospi recently gained five days in a row. For Samsung Electronics and LG Electronics, there is a drop after the previous day's earnings indications by a good 1 percent.
On the bond market, yields moved away from their daily lows as the dollar rose and were little changed by the end of the session. The U.S. 10-year yield rose 1 basis point to 1.6530%, remaining at a more than one-year high.
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