US and European stock markets slid on Friday after Donald Trump announced that he had tested positive for coronavirus a month before the US presidential election.
The S&P 500 index, the US equity market benchmark, fell by 1.6% in the opening trades on the New York Stock Exchange, while the tech-heavy Nasdaq index lost 2% and the Dow Jones industrial average lost 1.4%. However, they then pared their losses and were all down by about 1%.
Every major stock market index in Europe fell, although by the afternoon many had recovered some of their losses. The falls followed those in Asia, as investors moved money away from perceived riskier assets. The FTSE 100 in London dropped by 0.3% to about 5,867 points, while the Europe-wide Stoxx 600 index lost 0.8%.
Analysts said Trump’s diagnosis would heighten uncertainty in financial markets in the run-up to the election, scheduled to take place on 3 November.
Kit Juckes, the head of foreign exchange strategy at the French bank Société Générale, said there were “few immediate answers” to the uncertainties posed by the news, although he noted that the Democratic nominee, Joe Biden, had a significant lead in most national polls.
However, Juckes added: “The path of the election campaign will inevitably change and uncertainty has obviously increased.”
The Trump news added to concerns about the macroeconomic outlook as new data showed that US job growth slowed more than expected in September. The US Labor Department said on Friday that non-farm payrolls increased by 661,000 last month, after the economy added 1.5m jobs in August. Economists were expecting an increase in payrolls of 850,000.
James Knightley, the chief international economist at ING, an investment bank, said the jobs figures showed the US economic recovery was losing momentum.
“While employment continues to grow, the pace of gains is slowing while government jobs are being lost,” he said. “It underlines the argument for additional fiscal support.”
Oil prices were among the hardest hit on financial markets. Futures prices for Brent crude, the North Sea oil benchmark, fell by more than two dollars, or 5%, to less than $39 per barrel. The US West Texas Intermediate benchmark also lost as much as two dollars to fall below $37.
The prices of safe-haven assets rose in the immediate aftermath of the announcement about Trump before retreating over the course of the day. Gold prices rallied in morning trading but fell back by 0.3% later in the day to trade at $1,900 per troy ounce.
Investors bought government bonds, generally considered to be less risky than equities, after the news was announced. The yield on the benchmark US 10-year Treasury bond fell from 0.684% to 0.653% before recovering to trade slightly higher over the day. Bond yields move inversely to prices, falling as demand rises.
Derek Halpenny, the head of research at MUFG Bank, said the news would “diminish risk appetite” but added that it was unclear how it would ultimately affect financial markets, given differing views among investors on whether a Trump or Biden win would be more favourable for the US economy.
Halpenny also noted that a possible delay to the election may add to the uncertainty.
Mohit Kumar, an interest rate strategist at the US investment bank Jefferies, said Trump’s diagnosis and the failure of Republican and Democratic politicians to reach a breakthrough in negotiations meant a fresh stimulus package – a potential boost to stock markets – was unlikely until after the election result.