USA / Global markets fall as US Prez Trump tests positive for COVID-19

Washington: European stock markets slid on Friday after Donald Trump announced that he had tested positive for the coronavirus just over a month before the US presidential election.

Every major stock market index in Europe fell after the news broke. The falls follow those in Asia, as investors moved money away from perceived riskier assets. The FTSE 100 in London dropped by 0.6% to about 5,486 points in morning trading, while the Europe-wide Stoxx 600 index lost 0.3%.

Futures prices for US stock markets fell, with S&P 500 and Dow Jones industrial average futures losing 1.2%.

Analysts said Trump’s diagnosis would heighten uncertainty in financial markets in the run-up to the election, scheduled to take place on 3 November.

Kit Juckes, the head of foreign exchange strategy at the French bank Société Générale, said there were “few immediate answers” to the uncertainties posed by the news, although he noted that the Democratic nominee, Joe Biden, had a significant lead in most national polls.

However, Juckes added: “The path of the election campaign will inevitably change and uncertainty has obviously increased.”

The prices of safe-haven assets rallied. Gold prices recovered earlier losses to rise by 0.2%, with 1 troy ounce trading at $1,908 (£1,477).

Investors bought government bonds, which are usually considered to be less risky than equities, after the news was announced. The yield on the benchmark US 10-year Treasury bond fell from 0.684% as low as 0.653%, before recovering. Bond yields move inversely to prices, falling as demand rises.

Derek Halpenny, the head of research at MUFG Bank, said the news would “diminish risk appetite” but added that it was unclear how it would ultimately affect financial markets, given differing views among investors on whether a Trump or Biden win would be more favourable for the US economy.

Halpenny also noted that a possible delay to the election may add to the uncertainty.

Mohit Kumar, an interest rate strategist at the US investment bank Jefferies, said Trump’s diagnosis and the failure of Republican and Democrat politicians to reach a breakthrough in negotiations meant a fresh stimulus package, a potential boost to stock markets, was unlikely until after the election result.