- US stock futures tumbled 2% after President Donald Trump tested positive for COVID-19.
- Gold and US Treasuries rallied, as investors sought stability in safe-haven assets, while oil and cryptocurrencies dropped sharply.
- “Stock futures are certainly going down at time of writing, however. Risk is off there,” Rabobank strategists said in a note.
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Global equity markets and oil fell sharply on Friday, while gold rallied after US president Donald Trump said he and his wife had tested positive for coronavirus, sparking a rush to safe-haven assets and a jump in overall volatility.
US futures on the S&P 500, Dow Jones and Nasdaq 100 traded around 1-1.5% lower, suggesting the major indices will fall at the start of trade later on Wall Street, while oil suffered the heaviest blow, sliding by more than 3%, as investors fled risk-linked assets.
Even the US dollar came under pressure, to trade roughly flat against a basket of major currencies, to the benefit of typical safe-haven assets such as the Japanese yen, gold and US Treasuries.
Trump, who faced off against Democratic rival Joe Biden in a televised debate on Tuesday, got tested for the disease along with his wife, Melania, after his close confidant and White House counselor, Hope Hicks, tested positive earlier this week.
“News of Trump’s testing positive for Covid-19 test throws a spanner in the pre-election process, as it clearly limits his ability to campaign for the presidency, and the initial negative market reaction market implies that volatility will remain elevated as a result,” ADM Investor Services chief global economist Marc Ostwald said.
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European indices slipped in early trade, with the FTSE 100, the DAX and the CAC 40 all down between 0.5-0.6%, led by losses in the chemical, energy and industrial materials sectors.
The dollar index traded 0.1% up on the day around 93.81, having fallen back from an earlier intraday high of 94.03.
Meanwhile, various indicators of volatility – a measure of investor nervousness – rose sharply. Futures on the VIX index, which reflects options volatility on the S&P 500, were up by nearly 4%, while the V-DAX New – an indicator of options volatility on Frankfurt’s DAX index – was up 3.7%.
“It seems that the knee-jerk reaction was first to sell USD a little instead, at least until markets can work out exactly how this potentially plays out. Stock futures are certainly going down at time of writing, however. Risk is off there,” Rabobank strategists said in a note.
Spot gold was last up 0.1% on the day at $1,908 an ounce, having bounced off an earlier low of $1,889.90 an ounce as the news of Trump’s positive test broke. The yield on the 10-year US Treasury fell 2 basis points on the day to 0.659%, set for its biggest one-day decline in nearly two weeks.
Oil, one of the most sensitive commodities to geopolitics and the economy, plunged by as much as 4% at one point. Brent crude futures were last down 3.1% at $39.67 a barrel, while WTI futures fell 3.1% to $37.55 a barrel.
“News that Donald Trump has contracted Covid-19 adds to the bearish pressure,” SEB chief commodities strategist Bjarne Schieldrop said. “It was always a big wild-card in this election whether one of the candidates would contract C-19 thus placing the candidate on the side-lines.”
Highlighting the investor flight from risk was a drop in cryptocurrencies, with Bitcoin down by more nearly 4% on the day, while Ethereum fell by 7%.
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