NEW YORK, July 28 (Reuters) – Private equity and hedge funds cautioned on Thursday that a proposed U.S. tax increase on carried-interest income could potentially hurt small businesses and big investors, such as endowments, foundations and pension funds.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners. A change in the tax rule, which has been discussed for over a decade, would raise $14 billion, according to senators.

“Over 74% of private equity investment went to small businesses last year. As small business owners face rising costs and our economy faces serious headwinds, Washington should not move forward with a new tax on the private capital that is helping local employers survive and grow,” Drew Maloney, president and chief executive of the American Investment Council.

The Managed Funds Association (MFA) said pension funds, endowments and foundations’ $1.5 trillion investments in hedge funds and other alternative asset managers help them achieve better performance.

“It is crucial Congress avoids proposals that harm the ability of pensions, foundations, and endowments to benefit from high value, long-term investments that create opportunity for millions of Americans,” said Bryan Corbett, MFA president and CEO. A potential tax hike would mainly affect private equity and hedge fund managers compensation, which is largely tied to the performance of the funds.

Under the proposed rules, a carried-interest would apply for investments only after five years, two more than the current rule. However, Alex Farr, a tax partner at law firm McDermott Will & Emery, said the proposal also closes some other loopholes.

“There are some pretty material changes that severely limits some of the tax planning opportunities that people had been using to date to try to get around the holding period rules that have been put in place,” said Farr.

The carried-interest tax hike is part of the Democrats’ broad proposals to increase taxes on corporations and wealthy individuals to finance new spending on energy, electric vehicle tax credits and health insurance investments.

Reporting by Chibuike Oguh and Carolina Mandl, in New York Editing by Marguerita Choy

NEW YORK (Reuters) – Wall Street equities fell and U.S. Treasuries rallied on Tuesday a day before a likely Federal Reserve rate hike as investors grappled with growing economic concerns after retail giant Walmart Inc’s (WMT.N) profit warning and signs of a looming gas supply crisis in Europe.

The bid for safety also boosted the U.S. dollar, which snapped a three-session losing streak, while the energy supply concerns weighed on the euro.

European Union leaders agreed to ration gas usage after Russian’s Gazprom (GAZP.MM) said gas flows to Germany would fall from Wednesday to half of the current amount – already at just 40% of normal capacity. U.S. equities fell with retail stocks after Walmart slashed its profit forecast late on Monday as surging prices for food and fuel spurred consumers to cut back on discretionary purchases.

Since Walmart is seen as a “litmus test for the health of the consumer,” Carol Schleif, deputy chief investment officer at BMO Family Office, said investors are concerned about growth and feeling uncertain ahead of key economic data due out this week and the Fed’s interest rate decision expected on Wednesday.

“This week is forcing investors to be very short-term oriented. It’s not allowing anybody to lift their eyes up even a week or a month,” Schleif said. “It’s an asset market, not just in stocks, that seems to suggest people think growth is questionable in the intermediate term.”

Investors are expecting a 75 basis point Fed rate increase on Wednesday, with markets pricing about a 10% risk of a larger hike, as well as waiting to see whether economic warning signs prompt a shift in rhetoric.

“If they did 100 basis points it would probably surprise the market. There’s that nervousness. If it’s 75, as expected, and the Fed says it’s starting to see hints of slowing, the market might take that as a positive,” Schleif said.

The Dow Jones Industrial Average (.DJI) fell 228.5 points, or 0.71%, to 31,761.54, the S&P 500 (.SPX) lost 45.79 points, or 1.15%, to 3,921.05 and the Nasdaq Composite (.IXIC) dropped 220.09 points, or 1.87%, to 11,562.58. The pan-European STOXX 600 index (.STOXX) closed down 0.03% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.92%.

Adding to Tuesday’s gloom was the International Monetary Fund forecast for global real GDP growth of 3.2% in 2022, down from its 3.6% forecast issued in April, with downside risks from high inflation and Russia’s invasion of Ukraine potentially pushing the world economy to the brink of recession.

The gap between yields on two- and 10-year Treasury notes widened on Tuesday after more than two weeks when the short-end yield has been higher than the long end – often a recession signal.

Benchmark 10-year notes last rose 5/32 in price to yield 2.8032%, from 2.82% late on Monday. The 30-year bond last rose 17/32 in price to yield 3.0227%, from 3.05%. The 2-year note last fell 2/32 in price to yield 3.0609%, from 3.035%.

“The flight to quality makes sense if you’re concerned about a meaningful slowdown in growth or even heightened recession fears in Europe because of volatility in energy supply,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “Then you should see investors flock to Treasuries.”

The dollar index rose 0.752%, with the euro down 1.04% to $1.0114. The Japanese yen weakened 0.15% versus the greenback at 136.90 per dollar, while Sterling was last trading at $1.2027, down 0.12% on the day.

After rising earlier in the session, oil prices settled in the red as investors worried about weaker consumer confidence and the expectation that another 20 million barrels of crude oil would be released from the U.S Strategic Petroleum Reserve. Prices were supported earlier in the session on news that Russia was tightening its gas squeeze on Europe. U.S. crude settled down 1.78% at $94.98 per barrel and Brent settled at $104.40, down 0.71%.

Spot gold dropped 0.1% to $1,716.98 an ounce as investors eyed economic uncertainties and waited on the Fed. Bitcoin last fell 1.86% to $20,910.08.

Additional reporting by Herbert Lash in New York, Kane Wu in Hong Kong; Editing by Edmund Klamann, Angus MacSwan, Will Dunham and Mark Heinrich

NEW YORK, July 20 (Reuters) – Bitcoin rebounded after a brief sell-off late on Wednesday sparked by news that electric carmaker Tesla Inc (TSLA.O) had sold about 75% of its holdings of the virtual token.

Tesla Chief Executive Elon Musk cited concerns about his company’s “overall liquidity” as the reason for the sale.

The world’s largest cryptocurrency was last up 1.04% at $23,494.57, after sliding as much as 0.5% to $23,268.92 on the news. Tesla sold $936 million worth of bitcoin in the second quarter, more than a year after the company bought $1.5 billion of the cryptocurrency at the peak of its massive growth and popularity.

Musk has been an outspoken supporter of cryptocurrencies. His statements on the future of crypto and disclosures about his ownership of digital assets often boost the price of dogecoin and bitcoin. On Tesla’s earnings call, Musk said the primary reason for the sale was uncertainty about lockdowns due to COVID-19 in China, which have created production challenges for the company.

“It was important for us to maximize our cash position,” Musk said. “We are certainly open to increasing our bitcoin holdings in future, so this should not be taken as some verdict on bitcoin. It’s just that we were concerned about overall liquidity for the company.”

Musk added that Tesla did not sell any of its dogecoin, a meme-based cryptocurrency that he has touted. Tesla accepted bitcoin as payment for less than two months before stopping in May 2021. Musk has said the company could resume accepting bitcoin once it conducts due diligence on the amount of renewable energy it takes to mine the currency.

Bitcoin has been in recovery mode so far this week, in line with the stock market, as investors appear more optimistic about the U.S. Federal Reserve’s ability to rein in decades-high inflation.

Reporting by Hannah Lang, Gertrude Chavez-Dreyfuss and Nivedita Balu; Editing by Marguerita Choy, Richard Pullin and Richard Chang

TOKYO, (Reuters) – The Australian dollar ticked higher on Tuesday ahead of an expected half-point increase in the Reserve Bank’s policy rate, while the yen slid against the greenback amid a rise in U.S. Treasury yields.

The Aussie and New Zealand dollars were also supported by signs that the United States might soon ease tariffs on key trading partner China. Australia’s currency climbed 0.29% to $0.6888, while New Zealand’s kiwi rose 0.21% to $0.6222.

At the same time, the U.S. dollar was up 0.35% at 136.165 yen , gaining support from a strong rebound in the 10-year Treasury yield , which jumped to 2.9780% in Tokyo on Tuesday from the lowest since May at 2.7910% on Friday.

There was no trading in Treasuries on Monday, with U.S. markets closed for the Fourth of July holiday, which also resulted in thin currency-market trading.

Economists polled by Reuters expect the Reserve Bank of Australia on Tuesday will deliver another half-percentage-point rise in interest rates as it fights to tame inflation at two-decade highs, matching the increase it delivered last month in a hawkish surprise. read more

The Aussie was also supported by a Wall Street Journal report that the White House would announce an easing of some Chinese tariffs later this week in an attempt to dampen elevated inflation, analysts said.

The dollar index , which measures the buck against six major peers, including the yen, was about flat at 105.13 after finishing Monday largely unchanged. On Friday, it rose as high as 105.64, threatening the two-decade peak of 105.79 reached in mid-June.

The euro , which is the most heavily weighted in the index, rose 0.13% to $1.0435 after ending Monday about flat. Over the past two months, it has been bumping against a floor around $1.035, levels not seen since the beginning of 2017.

The euro got support overnight from a bump in regional yields after Bundesbank chief Joachim Nagel said the very accommodative stance of the European Central Bank (ECB) would “swiftly be abandoned” and a restrictive policy stance might be needed to achieve the inflation target.

The ECB is gearing up to raise interest rates for the first time in a decade later this month. The policy outlook may not sustain the euro longer term though, National Australia Bank markets economist Tapas Strickland wrote in a note to clients.

“Europe remains stuck in the middle between the Russia-Ukraine crisis and a weakening global economy,” he said. “Given Europe’s dire predicament, it is hard to see an enduring euro rally, which may keep USD strength going for longer.”

Reporting by Kevin Buckland; Editing by Bradley Perrett