SINGAPORE/TOKYO: U.S. stock futures and the Australian dollar fell on Friday after President Donald Trump said he and his wife had tested positive for the coronavirus.
Futures on the S&P 500 fell 1.8% in Asian trading after the news, extending earlier losses, while barometers of risk appetite, such as the Australian dollar and Treasury yields, dipped.
European stock futures also fell sharply as markets there prepared to open.
Here are analysts’ comments:
CHRIS WESTON, HEAD OF RESEARCH, PEPPERSTONE, MELBOURNE
“The President of the United States has got a disease which kills people. People are de-risking because of that.
“The next point is how far has this gone in (to the administration), which has big implications for the elections. The worst case scenario is we could see the election pushed back a bit.
“But it really depends on what we are talking about. Are we talking about a situation where he gets it and doesn’t turn up to debates? Or he gets it and uses it to say: ‘I’ve survived this, I’m a fighter,’ – or he passes away…we’ve got a lot of questions and not a lot of answers immediately available.”
JULIAN WEE, INVESTMENT STRATEGIST, CREDIT SUISSE, SINGAPORE
“The initial market reaction has been negative but I’m not sure that well prove enduring.
“Ultimately, once the initial kneejerk reaction has passed, the market will probably focus on what it might mean for the elections. And so far, the narrative has been turning more positive over the last week or so. Our official base case is for a Democratic sweep, pretty much in line with latest polling.”
KHOON GOH, HEAD OF ASIA RESEARCH, ANZ , SINGAPORE
“At this stage, it is too early to tell yet how this may affect the election outcome. Markets have sold off in a knee jerk reaction to the news, which is understandable.”
“The dollar was bought initially, but has since sold off. I imagine so long as it appears both the President and the First Lady are in reasonable condition, these market moves will unwind.”
NAOYA OSHIKUBO, SENIOR ECONOMIST, SUMITOMO MITSUI TRUST ASSET MANAGEMENT, TOKYO
“Trump has been trailing behind Biden and he has clearly failed to narrow the gap after the first debate, which is the most important of the three debates. I suspect markets will lean towards the view that Biden will likely win the election.
“What I am worried is that he will become even more aggressive against China after he caught the virus himself for I got the impression that British Prime Minister Boris Johnson has become more anti-China after he had COVID-19.
“For the time being it will be difficult for financial markets to be on risk-on mood.
YAKO SERA, MARKET STRATEGIST, SUMITOMO MITSUI TRUST BANK, TOKYO:
“We are seeing typical risk-off trades now, but as far as we know Trump is not gravely ill. It is possible that by the time we reach New York trading that markets will have calmed down.
“If Trump’s symptoms are mild and he stages a quick recovery, his support could increase, which would be similar to what happened with Brazilian President Jair Bolsonaro.
“However, this does damage Trump’s ability to campaign and time is running out before the election.
“Whether it’s Trump or Biden, the biggest problem is uncertainty. As long as we’re uncertain about who will win the election, it is difficult for markets to truly settle.”
FOLLOWING COMMENTS WERE MADE EARLIER, BEFORE TRUMP SAID HE HAD TESTED POSITIVE:
SHANE OLIVER, HEAD OF INVESTMENT STRATEGY, AMP CAPITAL, SYDNEY
“He wouldn’t be the first leader to have tested positive for coronavirus.
“The election is now underway so it may add to the uncertainty, but doesn’t change the fundamental outlook.
“There might be a sympathy vote for Trump if he gets the coronavirus.
“The market’s already a little bit on edge because of the upcoming election and the failure of talks to result in a new fiscal stimulus.
“You can imagine all sorts of scenarios here. If he tests positive and then just shows mild symptoms, it will be over in a few days. If he gets ill and has to go to hospital, the market will be a lot more concerned. Obviously, to the extent campaigning comes to a halt, it might increase fears that he might lose the election.
“Generally speaking, the market prefers the incumbent to win and the general preference has been for Trump to win because he will mean lower taxes and less regulation than a Biden presidency.
“But the whole issue around fiscal stimulus is complicated because, if Trump loses and the Democrats win and they get control of the Senate and the House, it makes fiscal stimulus assured, which will offset the impact of the tax hikes. The market would probably be happy to see a Biden presidency with a clean sweep.”
SEAN CALLOW, CURRENCY STRATEGIST, WESTPAC, SYDNEY:
“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.
“But does it shift polls? I just don’t know. We don’t have precedents for this…to us it looks like a setback for the Trump campaign. They’re a long way behind and they want Trump out there (campaigning).”
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