Belarus Plane Action, Tax Regulation, Bitcoin – What’s Moving Markets

Belarus bonds slump after forcing a civilian airplane to divert to Minsk, while U.S. stocks, oil and bitcoin head higher. Virgin Galactic could be in focus after the space tourism company successfully completed its first flight in more than two years, while international corporate taxes face change. Here’s what’s moving markets on Monday, May 24th.

1. Belarus prompts aviation turbulence, bonds slump

Global aviation was in uproar Monday following the decision of Belarusian authorities to force a Ryanair plane to land on Sunday in order to detain Roman Protasevich, an opposition-minded journalist who was on board.

Belarus scrambled a fighter jet and flagged what turned out to be a false bomb alert to force the plane, which was flying from Athens to Lithuania, to divert to Minsk, the capital of Belarus.

The UN’s International Civil Aviation Organization said the incident may have contravened a core aviation treaty, while the International Air Transport Association condemned the action, calling for “a full investigation by competent international authorities.”

The action has drawn condemnation from Europe and the United States, and is set to dominate the agenda of a European Union summit dinner on Monday. However, it’s debatable what actions can be taken to register their disapproval. The U.S. along with the EU, Britain and Canada have already imposed asset freezes and travel bans on almost 90 Belarusian officials, including President Alexander Lukashenko, following an August election that the Western powers say was fixed.

Belarus sovereign dollar-denominated bonds slumped Monday, with spreads over safe-haven U.S. Treasurys widening by 37 basis points to 603 bps from Friday, as measured on the JPMorgan EMBI global diversified index.

2. Stocks set to open higher; Virgin Galactic flies again

U.S. stocks are set to start the week on a positive note Monday, after the volatile training of last week, as investors continue to weigh up the relative merits of value and growth stocks amid the vaccine rollout and reopening of the economy.

By 6:05 AM ET (1005 GMT), Dow Jones futures were up 170 points, or 0.5%, at just over 34,300, S&P 500 futures were 0.5% higher and Nasdaq 100 futures gained 0.5%.

Wall Street saw wild swings last week, resulting in the Dow Jones Industrial Average posting its fourth negative week in five, while the S&P 500 registered two straight weeks of losses for the first time since February. The Nasdaq Composite, meanwhile, actually posted a small gain last week, snapping a four-week losing streak.

The earnings season is gradually winding down this week, even if there are still a number of retailers set to report. That said, the slate looks pretty empty Monday. Away from earnings, Virgin Galactic (NYSE:SPCE) could be in focus after the company successfully completed its first spaceflight in more than two years on Saturday, moving closer to its long-term goal of establishing space tourism.

3. Bitcoin bounces; Sentiment still weak

Bitcoin, the world’s biggest digital currency, has bounced Monday, regaining some lost ground, but sentiment surrounding this former darling of the trading community remains weak.

The digital currency was last seen 6% higher at $36,571, but this is still down nearly 50% from it’s all-time high of just under $65,000, hit in mid-April. It shed as much as 17% on Sunday.

Given this volatility, the market will closely follow a speech by Fed Governor Lael Brainard on digital currencies at the virtual Consensus by CoinDesk Conference later Monday.

Cryptocurrencies, and bitcoin in particular, have been hit of late as authorities in China and the U.S. moved to tighten regulation and tax compliance.

Additionally, one-time vocal supporter, Tesla (NASDAQ:TSLA) CEO Elon Musk suspended the use of bitcoin as a method to purchase its vehicles, citing concerns about the impact on the environment from its mining.

Bitcoin may find support at the $27,000-$28,000 level, according to an analyst from ethereumworldnews.com, but if it doesn’t recover from the current market dips that may be the signal of the start of a bear market.

4. Global corporate tax agreement nears

A global agreement on the corporate taxation of multinational companies is drawing nearer.

The Group of Seven countries are close to reaching agreement on such a deal, the Financial Times reported Monday, and something could be agreed as early as Friday after progress was made among top officials in recent days.

This follows the U.S. Treasury Department offering last week to accept a global minimum corporate tax of at least 15% during international negotiations, a rate significantly below its proposed 21% minimum for U.S. multinational firms.

France, Germany and Italy said the new proposal was a good basis for sealing an international deal, even if it is still well above the minimum rates of tax used by European countries such as Ireland and Luxembourg.

A deal by the seven major advanced nations could clear the way for a global deal later in the year, with nearly 140 countries seeking to reach broad agreement to rework rules for taxing multinational groups and big technology companies, such as Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

5. Crude gains on Iran talks snag

Crude oil prices strengthened Monday as talks to revive a 2015 Iranian nuclear deal, that would likely increase global crude supply, hit a hitch.

By 6:05 AM ET, U.S. crude was up 2% at $64.86 a barrel, while Brent was up 2% at $67.70.

Oil prices fell almost 3% last week after Iran’s president, Hassan Rouhani, said the United States was ready to lift sanctions on his country’s oil exports. Such a move could potentially allow up to 1 million barrels a day of crude to enter the global market.

However, the speaker of Iran’s parliament said on Sunday, Reuters reported, that a three-month monitoring deal between Tehran and the U.N. nuclear watchdog had expired and that its access to images from inside some Iranian nuclear sites would cease.

Without a monitoring deal, any trust between Washington and Tehran would likely evaporate, in all probability ending the wider talks on reviving the Iran nuclear deal.