US stocks fell in a choppy trading day on Friday after President Donald Trump announced that he and the first lady had tested positive for coronavirus just weeks ahead of the US presidential election.
Wall Street's benchmark S&P 500 index closed 1 per cent lower and Treasuries weakened, with investors closely following the news on the president as well as talks between policymakers in Congress over a stimulus package.
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The technology-heavy Nasdaq Composite declined 2.2 per cent, its worst session in more than a week, as shares in Apple fell more than 3 per cent and Tesla dropped more than 7 per cent. Despite the losses, the S&P 500 and Nasdaq Composite both ended the week about 1.5 per cent higher.
The decline in US stocks followed a volatile day for European equities and in Asia before that, when stocks sold off sharply in the moments after Mr Trump's announcement. London's FTSE 100 ended the day 0.4 per cent higher, after falling as much as 1.2 per cent earlier in the trading session. Frankfurt's Xetra Dax finished 0.3 per cent lower, while the broader Stoxx 600 index had recovered to end up 0.3 per cent.
Mr Trump's infection just over a month before polling day came as investors were already bracing themselves for market volatility triggered by the election. Wall Street's Vix volatility index rose half a point on Friday to 27.2, above its long-run average of about 20. Futures contracts also pointed to heightened expectations of turbulence in November and December.
Sebastien Galy, senior macro strategist at Nordea Asset Management, said "this shock should create a series of aftershocks", noting that it was already "expensive" for investors to hedge against potentially large market swings.
Disappointing US economic data further weighed on markets. The pace of domestic jobs growth showed signs of slowing, with only 661,000 payrolls added in September, below the 850,000 expected by analysts polled by Reuters.
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Talks over a new stimulus package continued in Washington, with comments from Nancy Pelosi, speaker of the House of Representatives, providing a fillip to equities during the trading day. Ms Pelosi said she was optimistic Democrats in the House would strike a deal over a stimulus bill with the Treasury, telling the MSNBC news channel that Mr Trump's coronavirus diagnosis "changes the dynamic" in negotiations.
The deadlock is being closely monitored by economists who fear the absence of further fiscal support would be a blow to the US recovery.
"The market this whole week seemed to be trading primarily on stimulus hopes," Christopher Murphy, the co-head of derivatives strategy at Susquehanna, said. He added that Mr Trump's health could "take some of the focus off of that".
Oil prices, which have taken a hit this month on concerns about falling demand, fell further on Friday. Brent crude, the international benchmark, settled down more than 4 per cent at $39.27 a barrel.
Some investors suggested it was not yet clear what the broader implications of Mr Trump's test result were for markets. Esty Dwek, the head of global market strategy at Natixis Investment Managers, said equity markets were "trying to figure out [how] to react".
"There is a knee-jerk reaction and a, 'how do we position for this?' but it's really too early to tell what impact it will have," she said.
- Financial Times