Wall Street stocks turned lower following reports that US president Joe Biden planned to raise capital gains tax for wealthy individuals.

The S&P 500 index gave up morning gains to slide 1.1 per cent in the afternoon in New York following a Bloomberg report stating that people earning more than $1m would pay a capital-gains rate of 39.6 per cent, up from 20 per cent. The tech-heavy Nasdaq Composite followed the blue-chip benchmark lower, falling 1.1 per cent.

The yield on the US 10-year Treasury fell 0.01 percentage points to 1.56 per cent after unemployment data showed the number of new claimants in the US fell to a pandemic-era low last week.

During the morning session on Wall Street, stocks wavered between small gains and losses as investors grew increasingly wary about a stock rally that began in November off the back of positive vaccine announcements.

“US markets can still perform well,” said Pascal Blanqué, chief investment officer at fund manager Amundi, while warning of the need to avoid “any excess euphoria that is building up”.

“There is not a huge upside left” in US markets, added Stéphane Monier, chief investment officer at private bank Lombard Odier. Investors were waiting for a market correction before adding to positions again. “It is unclear what could trigger another leg up,” he added.

Across the Atlantic, equities rose for a second session, with the pan-regional Stoxx Europe 600 index closing up 0.7 per cent. In the UK, London’s FTSE 100 added 0.6 per cent, while the FTSE 250, its mid-cap peer, climbed 1.3 per cent for its best daily performance since early March.

The Stoxx 600 is trading at 18 times forecast earnings compared with 23 times for the S&P 500 as Europe lags behind the US in the rollout of coronavirus vaccinations. Azad Zangana, senior European economist and strategist at Schroders, said this meant markets had more of a recovery trend to look forward to in Europe.

“US assets are incredibly expensive now compared to their own history and the rest of the world, so it is very easy to find good arguments to be underweight the US and overweight Europe,” he said.

The 10-year German Bund yield was little changed at minus 0.26 per cent after a European Central Bank meeting that signalled no change to its commitment to buying up vast quantities of bonds issued by nations in the bloc.

Global benchmark Brent crude fell 0.2 per cent to $65.19 a barrel after India, one of the world’s major oil importers, reported a record of 315,000 new daily infections, surpassing the US peak hit earlier this year.

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