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A wave of risk aversion swept through the markets on Friday after US President Donald Trump said he and his wife had tested positive for COVID-19 and will isolate themselves, weeks before the election.
FILE PHOTO: US President Donald Trump and First Lady Melania Trump walk to the Marine One helicopter to depart for the Kennedy Space Center in Florida from the South Lawn of the White House in Washington, United States, 27 May 2020. REUTERS / Carlos Barria
LONDON: Shares were sold and investors ditched riskier assets on Friday after US President Donald Trump said he and his wife had tested positive for the coronavirus and would isolate themselves, four weeks before the election Americans.
Investors sought safer assets such as gold, US Treasuries and the Japanese yen.
Futures for US stocks fell and European stocks opened lower, although they recovered some losses in early London trading after the initial move overnight. The STOXX 600 was down 0.3% and London’s FTSE 100 was down 0.7% at 09:30 GMT.
Shortly before 0500 GMT, Trump said on Twitter that he and his wife had been tested for the coronavirus after Hope Hicks, a senior adviser who recently traveled with the president, tested positive.
Later, he tweeted that he and the first lady tested positive: “We will begin our quarantine and recovery process immediately,” he said.
S&P 500 futures, which fell sharply on Trump’s tweet, leveled off a bit and were down 1.4% at 0931 GMT. High-tech Nasdaq futures fell 2.1 percent.
The MSCI World Stock Index, which tracks stocks in 49 countries, was down 0.2%.
Trump’s exposure could spark a new wave of volatility in the market as investors gear up for the November presidential election.
The duration of risk-off moves depends on the extent of the infection within the White House, said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.
“We may have to wait until the end of the weekend to get more clarity on the situation,” he said. “The reaction has been a bit over the top on US equity futures. It doesn’t mean the US administration can’t work.
“It will weigh on the market today and early next week, but it will not induce a lasting correction if the infection is contained in Trump,” he added.
Chart: Trump Tests Positive for COVID-19, US Equity Futures Fall – https://fingfx.thomsonreuters.com/gfx/buzz/gjnvwjzkopw/trumpper cent20covid.png)
In the immediate aftermath of the news, the US dollar index rose and the safe-haven yen made its biggest jump in more than a month, hitting 104.95 at 0553 GMT.
Compared to currencies, the dollar was up 0.1 percent on the day at 93.820 at 0933 GMT.
The Australian dollar, which serves as a liquid indicator of risk, was down 0.5%.
The euro fell 0.3% against the dollar to $ 1.17115.
Germany’s benchmark 10-year bond fell about 2 basis points to -0.545%.
Oil fell, and Brent crude fell 3.3% to $ 39.57 a barrel at 0935 GMT, after falling overnight and stabilizing somewhat with the opening of European markets.
Gold rose 0.1 percent to $ 1,906.26 an ounce.
“Depending on how this unfolds over the weekend, particularly if more members of the US government’s top leadership are diagnosed positive, gold could be poised for a prolonged rally,” said Jeffrey Halley, analyst OANDA Market Senior.
After Trump said he had coronavirus, online gambling site Betfair suspended betting on the outcome of the US elections. Betfair’s odds had previously shown the probability that Democratic challenger Joe Biden would win at 60 percent on Wednesday after the first US presidential debate.
Even before the news of Trump’s infection, markets had been more bearish after Washington failed to agree on a fiscal stimulus package to help the US economy recover from the impact of the coronavirus.
The latest round of monthly unemployment data in the US before the elections is scheduled for 12:30 GMT, although analysts say this has been relegated to the background.
(Information by Tom Arnold and Elizabeth Howcroft; additional information by Rachel Armstrong; edited by Larry King)
