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TOKYO (BLOOMBERG, REUTERS, AFP) – US stock futures plunged as much as 2% and Asian markets tumbled on Friday (October 2) after President Donald Trump said he had tested positive for the coronavirus , weeks before the elections.
The news could spark a new wave of volatility in the market as investors prepare for the tight November presidential election.
It compounded pessimistic mood on the trading floors, where investors were already pessimistic about the failure of US lawmakers to pass a new stimulus bill.
Futures pegged to the Dow Jones Industrial Average fell 266 points after falling more than 500 points or 2 percent. S&P 500 futures and Nasdaq 100 futures were also in negative territory.
Safe-haven assets rallied, with the Japanese yen, a resource in times of turmoil and uncertainty, rising to 105 to the US dollar, from 105.60 earlier in the day.
The US dollar rose against higher-yielding currencies such as the Australian dollar and the South Korean won, while gold rose more than 1% and oil prices continued their downward spiral.
Meanwhile, 10-year US Treasury yields fell more than one basis point to 0.66 percent, just above a month-long low, a classic signal from investors looking so-called safe havens.
“We are only a month away from the elections, so this news throws the election campaign into chaos for the Republican Party,” said IG Asia market strategist Pan Jingyi.
“Markets hate uncertainty and this meets all of those requirements,” said Jeffrey Halley, senior market analyst for Asia Pacific at Oanda Corp. the US government. “
In Asia, Japan’s Nikkei sank 0.7 percent, reversing previous gains when trading resumed after Thursday’s market close caused by a technical failure. Australian shares fell 1.4%.
Singapore’s Straits Times Index was down 0.3 percent as of 4:48 p.m. local time, after losing more than 1 percent.
Sydney, Jakarta and Bangkok fell more than 1%, but Manila and Wellington rose.
Holiday closings in major markets China, Hong Kong and South Korea had led to a dovish stock trading session ahead of key monthly US employment data.
In Europe, London, Paris and Frankfurt fell more than 1 percent at the open.
“We are struggling to understand it because clearly such things are not in the investment management manual.” said Mr. Gary Dugan, CEO of the Global CIO Office. “(Trump) could be isolated for two weeks, so it may mean declaring an election invalid. This will induce nervousness in the markets and we could see a 10 percent correction in US stocks that is likely to weigh down on Asian stocks for the rest of the year.
“In the long run, people will see a more stark contrast between Asian and US stocks. Asia has political stability and strong tech companies in the north. For people looking to make assignments globally, this only makes Asia more attractive. “
Sean Callow, a currency strategist at Westpac in Sydney, said: “It has the potential to reduce Trump’s campaign capacity. It has a lot of things and it is a disruption.”
“It also hurts in regards to the whole narrative that it’s really not much to worry about, it puts the Covid crisis itself front and center.”
Trump and First Lady Melania Trump were tested after Ms Hope Hicks, one of their closest aides, tested positive for Covid-19.
S&P 500 contracts had fallen earlier after the U.S. House of Representatives passed a $ 2.2 trillion (S $ 3 trillion) Democrats-only fiscal stimulus package that Republicans reject.
Traders are also awaiting the US Department of Labor report on nonfarm payrolls and the unemployment rate later Friday, following fresh layoff announcements from companies like Disney and Goldman Sachs.
“Investors need to protect themselves against S&P,” said Justin Tang, director of Asian research at United First Partners in Singapore. “It’s possible that most people still have their coverage given what happened in March. Much depends on what happens in the next seven days.
“If Trump goes to ICU, it will be a big problem, but if he has no symptoms, that volatility can be contained.”
“The result of Trump’s coronavirus test is fueling speculation that Biden will lead the US presidential election, fueling risk rallies in the yen and the dollar,” said Kengo Suzuki, chief currency strategist at Mizuho Securities in Tokyo. . “Trump’s test result also shows surprising spread of the coronavirus in the United States.”
The US dollar index rose 0.3 percent on risk aversion.
Oil prices extended the losses to around 3 percent on Friday on Trump’s news.
Brent crude was down $ 1.12, or 2.7 percent, to $ 39.81 a barrel at 0710 GMT. US oil was also down $ 1.12, or 2.9 percent, to $ 37.60.
Gold strengthened 0.5 percent to $ 1,914.87 an ounce, after a jump of more than 1 percent earlier in the news.
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