Dow futures plunge 500 points after Trump tests positive for coronavirus

TOKYO, Oct 2, 2020, Bloomberg, Reuters. US stock futures sank as much as 2 per cent, Asian markets slid and the US dollar climbed on Friday (Oct 2) after President Donald Trump said he had tested positive for the coronavirus, weeks ahead of elections, The Straits Times reported.

Futures tied to the Dow Jones Industrial Average plummeted 500 points after Trump tweeted the announcement at 12:54am ET in Washington. At 1:56am ET, Dow futures were down 432 points, or 1.56 per cent, S&P 500 futures lost 1.54 per cent and Nasdaq 100 futures plunged 1.78 per cent.

Meanwhile, the yield on the benchmark 10-year Treasury Note fell to 0.6578 per cent. Yields move opposite prices.

Trump’s positive could cause a new wave of market volatility as investors brace for the hotly-contested presidential election in November.

“We’re just a month to the election so this news does throw the election campaign into a disarray for the Republican Party,” Pan Jingyi, market strategist at IG Asia.

“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.”

“We’re struggling to get our head around it because such things are clearly not in the manual of investment management.” said Gary Dugan, chief executive officer at Global CIO Office. “He could be isolated for two weeks so that may mean he calls an invalid election. This will induce nervousness in the markets and we could see a 10 per cent correction in US equities that will likely drag down Asian equities for the balance of the year.”

“Longer-term, people will see a sharper contrast between Asian and US equities. Asia has political stability and strong technology companies in the north. For people looking to allocate globally, this just makes Asia more attractive.”

Sean Callow, currency strategist at Westpac in Sydney, said: “It has the potential to reduce Trump’s campaigning ability. He’s got a lot on and it’s an interruption.

“It also hurts him as far as the whole narrative that it’s really not much to worry about – it puts the Covid crisis itself back front and centre.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.27 per cent. Australia’s S&P/ASX 200 index fell 0.98 per cent as a decline in oil and copper prices weighed on the country’s resources sector.

Singapore’s Straits Times Index was down 1.16 per cent as of 1:38pm local time.

Japan’s Nikkei 225 index erased gains and fell 0.69 per cent as the Tokyo Stock Exchange resumed normal trading after its worst-ever outage brought the world’s third-largest equity market to a standstill.

Holiday closures in other major Asian markets had earlier made for a subdued equity trading session ahead of the monthly US jobs data later on Friday.

China’s stock and bond markets, foreign exchange and commodity futures markets are closed Oct 1-8 for the Golden Week holiday. South Korea and Hong Kong markets are also closed on Friday for holidays.

Euro Stoxx 50 futures were up 0.06 per cent, German DAX futures rose 0.03 per cent, but FTSE futures were down by 1.02 per cent.

President Donald Trump said he and his wife Melania will begin the “quarantine and recovery process immediately”.

Mr Trump and First Lady Melania Trump were tested after Hope Hicks, one of his closest aides, was positive for Covid-19.

S&P 500 contracts had dipped earlier after the US House of Representatives passed a US$2.2 trillion (S$3 trillion) Democrat-only fiscal stimulus package that Republicans reject.

Traders are also waiting for the US Labor Department’s report on non-farm payrolls and the jobless rate later on Friday, following new layoff announcements from the likes of Disney and Goldman Sachs.

“Investors should hedge themselves against S&P,” said Justin Tang, the head of Asian research at United First Partners in Singapore. “Most people may still be having their hedges on given what happened in March. A lot depends on what happens in next seven days.”

“If Trump goes to ICU it is going to be a big problem but if he is asymptomatic that volatility may get contained.”

“Trump’s coronavirus test result is fanning speculation that Biden will lead in the US presidential election, driving risk-off rallies in the yen and dollar,” Kengo Suzuki, chief foreign-exchange strategist at Mizuho Securities in Tokyo. “Trump’s test result also shows a surprise spread of coronavirus in the US.”

The US dollar index jumped 0.3 per cent on risk aversion.

Spot gold fell 0.55 per cent to US$1,894.60 an ounce, adding to its worst month since November 2016, while oil prices continued to fall, adding to a 10 per cent September drop.

Brent crude futures were trading down 0.93 per cent at US$40.54 a barrel on Friday, while US crude futures were down 0.98 per cent at US38.34 a barrel.

Oil prices fell more than 3 per cent on Thursday as rising coronavirus cases around the world dampened the demand outlook, while a rise last month in member output from the Organization of the Petroleum Exporting Countries also pressured prices.