US stocks slid in a volatile start to the trading day after President Donald Trump announced that he and the first lady had tested positive for coronavirus just weeks ahead of the US presidential election.
Wall Street’s benchmark S&P 500 declined 1.5 per cent at the open, as more than 90 per cent of the companies within the index fell, including large technology businesses like Apple and Microsoft. The Nasdaq Composite fell 1.8 per cent.
The slide followed a fall in European stocks earlier in the day and in Asia before that, as investors responded to the news. The Europe-wide Stoxx 600 had lost 0.8 per cent of its value by lunchtime on the continent, while London’s FTSE 100 was down 0.9 per cent and Frankfurt’s Xetra Dax dropped 1.4 per cent.
Mr Trump’s diagnosis just over a month before polling day came as investors were already bracing themselves for a sharp jolt of market tumult triggered by the election. Wall Street’s Vix volatility index rose more than 2 points on Friday morning to 29, against a long-run average of about 20. Futures contracts also pointed to heightened expectations of turbulence in November and December.
Disappointing US economic data also weighed on markets. The pace of domestic jobs growth showed signs of slowing, with only 661,000 payrolls added in September, sharply lower than the 850,000 expected by analysts polled by Reuters.
“We’re in a situation where there are more questions than answers,” said Robert Rennie, head of market strategy at Westpac, referring to the uncertain outlook for the US economy. Investors were likely to shun riskier assets until there was greater clarity on the health of Mr Trump and others in the White House, he added.
“This is happening at the beginning of October and we’ve still got four weeks to go . . . certainly the path ahead is one of extreme uncertainty to the start of November and potentially beyond,” he added.
Sebastien Galy, senior macro strategist at Nordea Asset Management, said “this shock should create a series of aftershocks”, noting that it was already “expensive” for investors to hedge against potentially large market swings.
Japan’s yen, which often rises during times of greater uncertainty as domestic investors pull funds back into the domestic market, strengthened 0.2 per cent against the dollar to ¥105.01. US Treasuries, considered to be a haven asset, rose modestly in price, pushing yields slightly lower.
Oil prices, which have taken a hit this month on concerns of falling demand, fell further on Friday, with Brent crude, the international benchmark, down about 4.3 per cent to $39.17 a barrel.
Some investors suggested it was not yet clear what the broader implications of Mr Trump’s diagnosis were for markets. The market “can’t really work out yet whether this represents a big risk-off moment, so it’s too soon to say how this will play”, said one Tokyo-based trader.
Analysts have other sources of uncertainty to contend with: lawmakers in the US remain at odds over a new fiscal stimulus package. The deadlock is being closely monitored by economists who fear the withdrawal of support would be a blow to the US recovery.
“There is an unusually high number of binary events to grapple with,” said Hugh Gimber, global market strategist at JPMorgan Asset Management, citing the US election, the wrangling over fiscal stimulus, the prospect of a vaccine and Brexit trade talks.
These issues are “pulling in different directions” making outcomes difficult to forecast, he added. “The traditional places to park money until the outlook becomes clearer are much less obvious,” Mr Gimber said.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2EzMzI1NTllLWNkODMtNDY2OS1iMDFmLTc3ZDhjZjNmZDFlMdIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2EzMzI1NTllLWNkODMtNDY2OS1iMDFmLTc3ZDhjZjNmZDFlMQ?oc=5
2020-10-02 11:19:00Z
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