US stock markets slid Friday on Donald Trump’s coronavirus diagnosis, which has added further uncertainty to an environment already being roiled by the pandemic, an anaemic employment outlook and the upcoming election.
The news that the president tested positive for Covid-19 drove earlier market moves, eclipsing the anticipated September jobs report due on Friday.
The S&P 500 and Dow Jones indices both partially recovered from the earlier sell-off. The S&P closed down 32 points, or 0.96 per cent, from an earlier drop of 1.25 per cent. Dow Jones dropped 134 points at close, after selling off more than 300 points soon after the market opened.
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The Nasdaq extended the loss to close down 251 points, or 2.2 per cent.
“The president of the United States getting a positive [Covid-19] test is a scary headline that will add to volatility in the market,” said Dan Ives at brokerage firm Wedbush in New York. “It’s adding more white knuckles to an already jittery market heading into the elections.”
“As investors get more comfortable that Trump is able to battle through this with minimal to no health issues, the market will start to look past this and towards November,” said Ives.
The news added more gloom amid the new waves of coronavirus cases around the globe. It also threw more uncertainty to November’s already contentious US presidential election.
On Friday morning, the US Labour Department reported that the economy added 661,000 jobs in September, missing economists’ estimates of 859,000. The unemployment rate dipped slightly to 7.9 per cent.
“The news about the president’s diagnosis underscores the reality that the pandemic continues,” said Josh Lipsky, director of programmes and policy at the Atlantic Council's GeoEconomics Center. “Today’s [job] report carries a warning: the US economy is headed for a harsh winter.”
“Taken together, today’s events should serve as a wake-up call to Congress and spur action on a relief package,” said Lipsky, former senior adviser at the International Monetary Fund.
The news roiled the markets just as hopes of further fiscal measures to spur the US economy were fading.
House Speaker Nancy Pelosi said on Friday that Trump’s diagnosis “changes the dynamic” of the stimulus negotiations “because here [Republicans] see the reality of what we have been saying all along. This is a vicious virus,” adding that she would pray for the president’s safety.
“We’ll find our middle ground. We’re legislators. We’ll get the job done,” said Pelosi to MSNBC.
The speaker and Treasury Secretary Steven Mnuchin talked on the phone Thursday but did not have a breakthrough on negotiations.
The House on Thursday evening passed Democrats’ US$2.2 trillion proposal. Mnuchin’s proposal was for US$1.6 trillion.
Investors such as Mark Haefele, chief investment officer at UBS Global Wealth Management, remained positive on equity markets’ longer-term outlook, saying that the firm retains “our positive medium term outlook for stocks”, hoping a vaccine, the passing of additional fiscal stimulus to shift the economy toward a “more normal” territory.
Trump and first lady Melania Trump were tested after Hope Hicks, one of the president’s closest aides, tested positive for Covid-19 on Thursday. Trump announced the news that both he and Melania tested positive in early hours on Friday.
Trump, 74, is in a higher risk of hospitalisation and fatality because of his age alone, according to data from the US Centres for Disease Control and Prevention.
Overnight, benchmark indices fell in five of the 10 Asia-Pacific markets that were trading on Friday after the news broke as global investors fled for safe haven assets. Stock benchmarks fell in Japan, Singapore, Thailand, Indonesia and Australia, while rising in Malaysia and India.
The Nikkei 225, the major gauge, dropped as much as 1 per cent, reversing earlier gains after trading resumed on the Tokyo Stock Exchange following the worst technical glitch in the history of the exchange.
“There could be a potential tumble in the Hong Kong market on Monday, when trading resumes after the Mid-Autumn and National Day holidays,” said Kevin Leung, executive director of investment strategy at Haitong International Securities.
“Assuming [Trump] recovers soon, the long-term impact on market may not be very big, even though short term markets could be very volatile.”
“Markets hate uncertainty and this ticks all those boxes,” said Jeffrey Halley, senior market analyst for Asia-Pacific with Oanda Corp. “Not because of the president alone, but because this potentially means it has spread to the upper-level echelons of the government in the US.”
More from South China Morning Post:
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This article US stock markets slide after Donald Trump’s coronavirus diagnosis first appeared on South China Morning Post