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Stocks fall, dollar gains after Trump gets coronavirus

NEW YORK/LONDON (Reuters) - Global equity markets slumped and investors piled into gold and the Japanese yen on Friday after U.S. President Donald Trump tested positive for the coronavirus, adding to market uncertainty just 32 days before the U.S. election.

Trump’s bombshell announcement spurred risk-off moves among investors already concerned about an elusive coronavirus relief package aimed at bolstering a U.S. economy that has lost steam, as seen by slowing jobs growth in the September payrolls data.

Gold posted its best week in eight even after paring gains, while the yen advanced sharply before also retreating a bit. Yields on the 10-year U.S. Treasury note rose slightly, stuck in a narrow trading range it has held for three weeks.

(Graphic: U.S. 10-year Treasury yield - )

How Americans feel about the pandemic when they vote on Nov. 3 could determine the election’s outcome, and that is highly unusual, said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors in Boston.

“Today’s news demonstrates a bit of a weakness in terms of the Trump re-election campaign,” he said. “The range of outcomes has expanded and some of the more extreme outcomes have increased in probability, and markets certainly don’t like that.”

Trump is experiencing mild symptoms but will keep working after testing positive, administration officials said.

The main U.S. stock indexes fell but regional ones in Europe ended slightly higher after an initial sell-off on the Trump news. The FTSEurofirst 300 index .FTEU3 rose 0.22% to 1,405.35 and the STOXX Europe 600 .STOXX added 0.25% to 362.69.

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MSCI's benchmark for global equity markets .MIWD00000PUS fell 0.69% to 564.07, while its emerging markets index .MSCIEF fell 0.29%.

On Wall Street, the Dow Jones Industrial Average .DJI fell 0.48%. The S&P 500 .SPX lost 0.96% and the Nasdaq Composite .IXIC dropped 2.22%, with market leaders Apple Inc AAPL.O, Microsoft Corp MSFT.O and Amazon.com AMZN.O the heaviest drags.

How long risk-aversion 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.

“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 said.

(Graphic: Futures drop - )

The Labor Department’s closely watched employment report on Friday was the last before the presidential election.

September’s employment gains were the smallest since the jobs recovery started in May and left the U.S. labor market a long way from recouping the 22.2 million jobs lost in March and April, indicating slower growth heading into the fourth quarter.

U.S. President Donald Trump walks with first lady Melania Trump at Cleveland Hopkins International Airport in Cleveland, Ohio, U.S., September 29, 2020. REUTERS/Carlos Barria

U.S. nonfarm payrolls increased by 661,000 jobs last month, below consensus expectations of 850,000, leading to mostly negative reaction by economists.

But both Arone and Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA in New York, said the loss of government jobs, mostly seasonal in education, pulled numbers lower while the private sector’s gains were above overall expectations.

“The net result is the seasonal factors pulled down the state and local portion, very, very dramatically, in particular in the education area,” Ricchiuto said. “The private sector component, however, continues to improve at a healthy pace.”

The government lost more than 200,000 jobs, Arone said.

“Those job losses on the government side are real, don’t get me wrong. But overall the private sector seems to be hanging in there pretty well,” he said.

(Graphic: Nonfarm payrolls - )

BETS ARE OFF

With more uncertainty about the election, online gambling site Betfair suspended betting on its outcome.

Trump said on Twitter late on Thursday that he and first lady Melania Trump were going into quarantine after an aide tested positive for the virus, triggering a rise in the dollar and the yen. The dollar index =USD rose 0.128%, with the euro EUR= down 0.31% to $1.1711. A couple of hours later, Trump tweeted that he and his wife had tested positive.

The Japanese yen JPY= strengthened 0.15% versus the greenback at 105.37 per dollar.

The Australian dollar, which serves as a liquid proxy for risk assets, slipped 0.23% AUD=D3.

Germany's benchmark 10-year bond traded 0.2 basis points lower at -0.539% DE10YT=RR.

Crude prices fell 4% on Trump’s positive test for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the oil market’s weak recovery.

Brent crude futures LCOc1 settled down $1.66 at $39.27 a barrel. U.S. crude futures CLc1 fell $1.67 to settle at $37.05 a barrel.

Gold pared early gains to turn lower as stocks pared losses.

“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.

Spot gold prices XAU= fell 0.20% to $1,901.27 an ounce. U.S. gold futures GCv1 settled down 0.5% at $1,907.60.

Reporting by Herbert Lash in New York and Elizabeth Howcroft; additional reporting by Rachel Armstrong in London; Editing by Dan Grebler, Nick Zieminski and Paul Simao

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