US President Donald Trump. Picture: AFP/BRENDAN SMIALOWSKI
US President Donald Trump. Picture: AFP/BRENDAN SMIALOWSKI

London — A wave of risk aversion swept markets on Friday after US President Donald Trump said he and his wife had tested positive for Covid-19 and will isolate, weeks ahead of the elections.

Shortly before 5am GMT, Trump said on Twitter that he and his wife had been tested for coronavirus after Hope Hicks, a senior adviser who recently travelled with the president, tested positive.

He later tweeted he and the first lady had tested positive: “We will begin our quarantine and recovery process immediately,” he said.

US stock futures fell on the news and treasury yields dipped.

Analysts said the initial risk-off moves were a knee-jerk reaction. As European markets opened, the move in US stock futures pulled back slightly.

At 7.35am GMT, S&P 500 futures were down 1%. Futures for the tech-heavy Nasdaq fell 1.2%.

European shares opened lower. At 7.36am, the Stoxx 600 was down 0.5% and London's FTSE 100 was down 0.7%, already recovering from their initial losses.

The MSCI world equity index, which tracks shares in 49 countries, was down 0.2% at 7.36am GMT.

Trump’s exposure could cause a new wave of market volatility as investors braced for the presidential election in November. How long the risk-averse moves 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.

“We may have to wait until the end of the weekend for more clarity on the situation,” he said. “The reaction has been a bit excessive with US stock futures. It doesn't mean the US administration is not able to function.”

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

Immediately after the news, the US dollar index rose and the safe-haven yen made its biggest jump in more than a month, reaching ¥104.95 at 5.53am GMT.

Within 10 minutes, the dollar changed course and started falling. Versus a basked of currencies, it was at 93.759 by 7.37am GMT.

The yen stabilised as European markets opened, at ¥105.185 at 7.37am GMT. The Australian dollar, which serves as a liquid proxy for risk, recovered some losses against the US dollar as the moves pulled back.

The euro was down 0.2% against the dollar, at $1.1721.

Germany's benchmark 10-year bond was down less than one basis point at -0.539%.

Oil fell, with Brent crude down 2.6% at $39.85 a barrel at 0724 GMT, after falling overnight and stabilising somewhat early in the European session.

Gold rose, as investors flocked to safer assets.

The effect on the US elections is unclear. Even before news of Trump's infection, markets had been more bearish after Washington failed to reach an agreement on a fiscal stimulus package to help the US economy recover from the effects of coronavirus.

The last round of monthly US unemployment data before the elections is due later in the session, although analysts say this has been relegated to secondary importance.

Reuters

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