By Tom Arnold and Elizabeth Howcroft
LONDON (Reuters) – Wall Street was set for a heavy tumble on Friday as news that U.S. President Donald Trump and his wife had tested positive for coronavirus just four weeks before U.S. elections sent investors into safer gold, Treasuries and the yen.
Europe’s main bourses were down 0.5%, having clawed back some of their starker morning falls <.STOXX>, but the futures markets were pointing to 1.5% to 2% losses for Wall Street’s S&P 500 <EScv1> and Nasdaq <NQc1>.
Trump said on Twitter he and his wife had been tested positive for coronavirus: “We will begin our quarantine and recovery process immediately,” he said in a late night tweet, adding one of his chief aides had contracted the virus too.
The MSCI world equity index, which tracks shares in 49 countries, was down 0.2% but still on course for a 2% rise for the week which will be its best in over a month <.MIWD00000PUS>.
Markets will have other news to digest with monthly U.S. jobs data due at 1230 GMT, but Trump’s exposure could cause a new wave of market volatility if it looks like disrupting in any way the presidential election, which is just 33 days away.
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.
“It will weigh on the market today and early next week but will not induce a long-lasting correction if the infection is contained to Trump,” he added.
The United States has never delayed a presidential election, not even during the Civil War or Great Depression, and only moved it for administrative reasons twice – both within the first 60 years of the country’s founding.
When it comes to stock market shocks, the assassination of President John F. Kennedy on Nov. 22, 1963, saw the S&P 500 plunge nearly 3% and Wall Street shut down the New York Stock Exchange at 2:07 p.m. EST. But the losses were confined to a single day and the market recovered within two days.
The news from the White House also triggered a rise in the dollar as well the safe-haven Japanese yen which saw its biggest jump in more than a month, reaching 104.95 at 0553 GMT <JPY=EBS>.
Against a basked of currencies, the dollar index was up 0.1% on the day at 93.807 at 1051 GMT.
The Australian dollar, which serves as a liquid proxy for risk assets, was down 0.5% <AUD=D3>, though regional tensions meant it was Russia’s rouble that took the biggest hit, dropping 1.5%.
Germany’s benchmark 10-year bond was down around 2 basis points at -0.543% <DE10YT=RR>.
Oil fell, with Brent crude <LCOc1> down 4% at $39.29 a barrel at 1053 GMT, extending losses as the European session wore on.
Gold rose, up 0.2% at $1,908.63 per ounce, having hit a 10-day high earlier in the session <XAU=>.
BETS ARE OFF
“Depending on how this situation evolves over the weekend, notably if more members of the U.S. government’s senior leadership are diagnosed positive, gold could be set for an extended rally,” said Jeffrey Halley, a senior market analyst at OANDA.
With the situation ahead of the election now thrown into confusion, online gambling site Betfair suspended betting on the outcome of the Nov. 3 vote.
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 U.S. economy recover from the impact of coronavirus.
The last round of monthly U.S. unemployment data before the elections is expected to show that 850,000 new jobs were added in September, down from 1,371,000 the month before. Analysts say this has been relegated to secondary importance in terms of market-moving news.
(Reporting by Tom Arnold and Elizabeth Howcroft; additional reporting by Rachel Armstrong; Editing by Larry King and Tomasz Janowski)
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