Markets destabilised by Trump catching covid-19 and oil price fall

Donald Trump and the First Lady both tested positive for covid-19 yesterday, sending stock markets into "mild disarray."

The American president's positive covid-19 test will "just add to the uncertainty rippling through markets", ahead of November's election, according to Hargreaves Lansdown's Susannah Streeter.

Donald and Melania Trump both confirmed a positive test on Thursday, with a little over a month to go before the presidential election and days after the first Presidential debate with Joe Biden.

Streeter, a senior investment and markets analyst at HL, said while there was a chance there could be "a sympathy vote" from some quarters, "given he has been forced into quarantine, it will cut down the time he can spend on the stump trying to win over wavering voters".

She added: "With some key state polls tight and this positive test coming so close to the election, this development will just add to the uncertainty rippling through the markets. There are already signs of a flight to safety with both the dollar and the yen rising sharply, and gold on the rise too."

US treasuries have also jumped, as investors seek a place to hide amid what they fear could be a period of further volatility with just a month to go before the election. The virus is touching every part of US society, from the President to Amazon's 20,000 warehouse and cashier staff in the United States who have tested positive for the virus so far.

'State of disarray'
Russ Mould, investment director at AJ Bell, added: "Trump catching covid-19 has put the markets in a mild state of disarray. First, the President of the United States becoming ill creates a sense of instability for markets in general. Second, it raises the question of how the Presidential election will play out."

"One could view the market reaction as investors increasing the probability that Biden will win the election. His intention to raise taxes will not be good for corporate profits and therefore a negative for the stock market."

"Oil prices were also weak on Friday, two signals that suggest the latest decline in equity markets may not entirely be caused by Trump testing positive. This commodity is an economic bellwether and a decline in the price could be a red flag that the global economic recovery faces some near-term headwinds. Brent crude fell 2.5% to $39.92 per barrel."

"The FTSE 100 fell 0.6% to 5,841 with energy, mining and consumer cyclicals the worst performing parts of the market. Germany's DAX index traded 0.9% lower. Pre-market indicative prices suggest a 1% to 1.2% decline for the main indices in the US when its markets open later."

"In the grand scheme of things, the scale of these declines isn't as dramatic compared to how the markets behaved in February and March as the pandemic unfolded. It certainly isn't time to panic," he added.

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