GLOBAL equity markets slumped and investors moved into safer gold and the Japanese yen on Friday after United States President Donald Trump and his wife tested positive for the coronavirus, adding to market uncertainty just 32 days before US elections.
Trump’s bombshell announcement sparked a risk-off mood among investors already concerned about an elusive fiscal stimulus package aimed at bolstering a US recovery that’s been losing steam as seen by slowing jobs growth in September payrolls data.
The knee-jerk reactions subsided as markets assessed what Trump’s diagnosis meant for the election and economy, given Democratic challenger Joe Biden’s hefty lead in the polls. The S&P 500 .SPX recovered some of the steep losses seen in futures overnight, and was last off 0.8 per cent. US Treasury yields climbed as steadying stocks sapped investor appetite for safe-haven government debt.
“This injects further uncertainty into the outcome of the election. My read is that markets have demonstrated an aversion of late especially to uncertainty, not so much to one or the other candidate winning. What we are seeing in stocks early this morning, and in Treasuries as well, is consistent with that. Hopefully the situation will be clarified soon and the uncertainty will dissipate.”
“However, remember that this is not the only issue – markets are also paying attention to the likelihood that another stimulus package will pass soon. If that happens it could offset at least in part the uncertainty generated by the Covid news.”
CRAIG ERLAM, SENIOR MARKET ANALYST, OANDA EUROPE (emailed)
“It’s a bit of a cliche but the markets do hate uncertainty and today is evident of that. We don’t even know what impact this will have on Trump’s health, let alone the implications for the election next month or his ability to campaign in the interim.
“I don’t think we can read too heavily into the market reaction though, with everyone demanding to know what it means. Is it a reflection of the mood towards a Biden Presidency? I would argue not. That’s not to say markets will favour him a month from now if he wins but I don’t think that’s what’s going on.
“Not to mention that the initial reaction came against the backdrop of more failed stimulus talks on Capitol Hill and prior to the jobs report, which have probably contributed to the risk-off mood. Everything should become much clearer in the coming days.”
“The knee-jerk reaction from the market was dramatic. All of the safe-haven assets got the bid that you have with those sorts of headlines. But the more information the market receives, especially if the president is recovering and where the symptoms have been mild if that’s the report, it should ease pressure on the market.
“The futures market has eased a bit. Granted the employment data were disappointing, but the condition of the president at this point is more important for the market, especially given that we are right in the midst of the election season.”
– REUTERS
