U.S. officialdom could well start taking a more proactive stance on cryptocurrencies, on top of global corporate tax levels. Stock indices on Wall Street are set to continue the recent rebound after the weak start to the week, while the crude market frets over the potential of additional Iranian supply. European PMIs point to an economic recovery in the region. Here’s what’s moving markets on Friday, May 21st.
1. Crypto treasury
Forget Elon Musk, Bitcoin (BTC) needs to start worrying about Janet Yellen. The Treasury said on Thursday that all crypto transactions over $10,000 should be subject to a reporting requirement, bringing it into line with cash transactions.
It said in a statement that the move is intended “to minimize the incentives and opportunity to shift income out of the new information reporting regime.”
The news pushed Bitcoin back down below $40,000, a level that is also close to its 200-day moving average, a key indicator of momentum, although it has since recovered. As of 6 AM ET (1000 GMT), the world’s biggest digital currency was trading at $40,895. up 2.2% on the day.
Separately, Federal Reserve Chairman Jerome Powell said the Fed will publish a paper this summer on its own putative digital currency, which he stressed would be a complement to the existing dollar, not a replacement for it.
2. Minimum Tax
Yellen was a busy woman yesterday. The Treasury Secretary also followed up her proposals for the reform of U.S. corporate taxes by proposing a 15% global minimum tax on corporate income.
The proposed 15% rate is lower than the 21% proposed earlier for the overseas earnings of U.S. companies by Yellen, and will be seen by some as reopening the door to U.S. companies seeking a foreign domicile for reporting purposes. However, it is still above the minimum rates of tax used by countries such as Ireland and Luxembourg, and may face European opposition, accordingly.
3. Stocks seen continuing rebound; Applied Materials in focus
U.S. stocks are set to open marginally higher later Friday, continuing the previous session’s rebound from a three-day losing streak as investors recovered from the surprise of the minutes from the last Federal Reserve meeting touching on the idea of bond tapering.
A new pandemic-low in jobless claims helped sentiment on Thursday, but the rise in continuing claims also played into the idea that the central bank will remain in a giving mood for some time to come.
Stocks likely to be in focus later include Applied Materials, whose quarterly report after the bell on Thursday reflected ongoing strong demand for chipmaking equipment. Foot Locker (NYSE:FL) and Deere (NYSE:DE) lead a dwindling bunch of companies reporting.
4. Europe PMIs point to services recovery
Europe’s economic recovery accelerated in May with services coming back to life as manufacturing cooled, according to preliminary readings of purchasing manager indices across the continent.
The Eurozone composite PMI compiled by IHSMarkit rose to 56.9, its highest in over three years and above analysts’ expectations, as the services PMI picked up to 55.1 from 50.5 in April.
In the U.K., meanwhile, the composite PMI rose to 62.0 from 60.7, in line with expectations, with both the manufacturing and services indices holding well above 60.
The euro was flat at just over $1.22, while the pound consolidated close to its high for the week at just over $1.42.
5. Potential Iranian supply hangs over crude market
Crude oil prices traded higher Friday, recovering from three days of selling, but are still set to post a weekly fall as the market braces for additional supply from Iran.
By 6 AM ET, U.S. crude was up 1.2% at $62.66 a barrel, while Brent Oil was up 0.9% at $65.72. Both contracts are still down over 5% and on track to post their biggest weekly loss since March.
Iran and world powers have been in talks since April on reviving the 2015 nuclear deal which limited the Persian Gulf country’s nuclear ambitions, and there have been positive noises surrounding progress from both Iranian and European circles this week.
If the U.S. was to get aboard, this would potentially allow around 1 million barrels per day of additional Iranian barrels to hit the market later in the year.
Adding to worries about supply, the number of active oil rigs counted by Baker Hughes across North America has risen steadily in recent weeks. The company’s latest weekly update is due at 1 PM ET, as usual, while the CFTC will release its weekly commitments of traders report at 3:30 PM ET.
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