Market Close Oct 02

Market shivers as Trump is infected

Investors worry about leadership void; Safe havens in demand; Concerns swirl about US economic recovery ahead of payroll data

Market shivers as Trump is infected
It took months before the US President was prepared to wear a mask despite health experts saying it is the best defence to prevent someone getting the coronavirus. File photo by AFP.

(ATF) Hong Kong: Financial markets shivered after US President Donald Trump tweeted he had tested positive for COVID-19 amid concerns how US government leadership can effectively function through the pandemic just week ahead of the presidential elections.

Fund managers said it could hit the credibility of US economic reopening which will be questioned even more strongly and also create doubts among investors about the shape of the recovery.

Havens benefitted from safety bids – Gold surged 0.5% to $1,914.87 an ounce, US Treasuries jumped with the 10-year yield falling a basis point to 0.66% and yen jumped 0.4% to 105 to a dollar.

“De minimus President Trump will be in isolation for the next two weeks. Other members of the White House inner-sanctum could also be found to have contracted the virus which will impair decision-making,” Gary Dugan, CEO at Purple Asset Management, said.

“Aside from the President, there is a clear and present danger to the US government leadership and how effectively it can function through this crisis.”

US futures sold off on the announcement, European stocks were weak and Asian markets ended on a weak note in holiday truncated trade. 

Markets in China, Hong Kong, Taiwan, India and South Korea are shut for holidays.

Australia’s S&P ASX 200 tumbled 1.39%, Japan’s Nikkei 225 % eased 0.67% after trading resumed following Thursday suspension due to a technical glitch and the MSCI Asia Pacific index slipped 0.69%

News of Trump’s Covid-19 positive test has spooked markets ahead of the closely watched US employment report to be announced later in the day.

A Reuters survey of economists nonfarm payrolls likely rose by 850,000 jobs last month after increasing 1.371 million in August amid the hiring of nearly a quarter million workers for the 2020 Census. That would leave employment 10.7 million below its level in February.

But some fund managers see opportunity in the sell-off.

“I don't think this will have a 'real' effect on the timing of the recovery, rather, it may make more exuberant investors a little more cautious,” said Paul Sandhu, fund manager at BNP Paribas Asset Management.

“The market will likely see volatility going into the weekend and possible further weakening of USD which has already weakened following the debates on Tuesday. Investors should continue looking at opportunities to diversify their portfolios. Alpha opportunities will become available, but as always, keep your downside protection in place.”

The dollar is below the 94 mark against a basket of currencies, just above the two-year lows struck last month. 

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Foreign Exchange:

Asia Stocks

· Japan’s Nikkei 225 index retreated 0.67%

· Australia’s S&P ASX 200 slid 1.39% 

· The MSCI Asia Pacific index dropped 0.69%.

Stock of the day

Bonds from China property developer Evergrande rose 2-4% on the news that several block deals had taken place as investors acquired the companies bonds after the recent sell-off following reports of liquidity stress. The 11.5% bonds due 2022 rose the most adding 4% to 91 cents on the dollar.