Stocks fall, dollar gains after Trump gets coronavirus

Global equity markets slumped and investors piled into safer gold and the Japanese yen on Friday after U.S. President Donald Trump and his wife tested positive for the coronavirus, adding to market uncertainty just 32 days before U.S. elections.

Trump’s bombshell announcement sparked a risk-off mood among investors already concerned about an elusive coronavirus relief package aimed at bolstering a U.S. economy that has lost steam, as seen by slowing jobs growth in September payrolls data.

Gold headed toward its best week in nearly two months even as it pared early gains, while the Japanese yen made its sharpest advance in more than a month. But the benchmark 10-year U.S. Treasury note rose mildly, entrenched in a narrow trading range it has held for three weeks.

How voters feel about the pandemic on voting day could determine the election’s outcome and that is highly unusual, said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors in Boston.

“Today’s news demonstrates a bit of a weakness in terms of the Trump re-election campaign,” he said. “The range of outcomes has expanded and some of the more extreme outcomes have increased in probability and markets certainly don’t like that.”

Trump is experiencing mild symptoms but will keep working after testing positive, administration officials said.

Stocks on Wall Street mostly fell but regional indexes in Europe ended slightly higher after an initial sell-off on the Trump news. The FTSEurofirst 300 index rose 0.22% to 1,405.35 and the STOXX Europe 600 added 0.25% to 362.69.

MSCI’s benchmark for global equity markets fell 0.5% to 565.15, while its emerging markets index fell 0.26%.

On Wall Street, the Dow Jones Industrial Average fell 0.08%, while the S&P 500 lost 0.61% and the Nasdaq Composite dropped 1.99%.

How long the risk-aversion will last depends on the extent of the infection within the White House, said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

“It will weigh on the market today and early next week but will not induce a long-lasting correction if the infection is contained to Trump,” he said.

As for stock market shocks, the assassination of President John F. Kennedy on Nov. 22, 1963, caused the S&P 500 to plunge nearly 3% and the New York Stock Exchange shut two hours before its regular closing time. But the losses were confined to a single day and the market recovered within two days.

The Labor Department’s closely watched employment report on Friday was the last before the Nov. 3 presidential election.

September’s employment gains were the smallest since the jobs recovery started in May and left the U.S. labor market a long way from recouping the 22.2 million jobs lost in March and April, indicating slower growth heading into the fourth quarter.

U.S. nonfarm payrolls increased by 661,000 jobs last month, below consensus expectations of 850,000, leading to mostly negative reaction by economists.

But both Arone and Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA in New York, said the loss of government jobs, mostly seasonal in education, pulled numbers lower while the private sector’s gains were above overall expectations.

“The net result is the seasonal factors pulled down the state and local portion, very, very dramatically, in particular in the in education area,” Ricchiuto said. “The private sector component, however, continues to improve at a healthy pace.”

The government lost more than 200,000 jobs, Arone said.

“Those job losses on the government side are real, don’t get me wrong. But overall the private sector seems to be hanging in there pretty well,” he said.

BETS ARE OFF

With the election now more uncertain, online gambling site Betfair on Friday suspended betting on the outcome of the Nov. 3 vote.

The news from the White House triggered a rise in the dollar and the yen. The dollar index rose 0.103%, with the euro down 0.28% to $1.1714.

The Japanese yen strengthened 0.15% versus the greenback at 105.37 per dollar.

The Australian dollar, which serves as a liquid proxy for risk assets, was down 0.23%.

Germany’s benchmark 10-year bond was down around 0.7 basis point at -0.536%.

Crude prices fell 4% on Trump’s positive test for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the oil market’s weak recovery.

Brent crude futures settled down $1.66 at $39.27 a barrel. U.S. crude futures fell $1.67 to settle at $37.05 a barrel.

Gold pared early gains to turn lower as stocks pared losses.

“If more members of the U.S. government’s senior leadership are diagnosed positive, gold could be set for an extended rally,” said Jeffrey Halley, a senior market analyst at OANDA.

Spot gold prices fell 0.17% to $1,901.77 an ounce. U.S. gold futures settled down 0.5% at $1,907.60.