U.S. Stock Futures Drop After Trump Tests Positive for Covid-19

By Chong Koh Ping

U.S. stock futures fell, and bonds rallied, after President Trump said he and first lady Melania Trump have tested positive for Covid-19, presenting investors with fresh political uncertainty just weeks before the election.

S&P 500 futures fell 1.7% on Friday, while futures tied to the Dow Jones Industrial Average and the Nasdaq-100 each shed nearly 2%, suggesting that U.S. markets could open lower.

The yield on the 10-year U.S. Treasury note fell to 0.661%, after settling at 0.677% in the previous session. Bond yields fall as prices rise.

The diagnosis throws up a host of uncertainties for markets to process.

"What the market is really worried about is: What's the backup plan--will the U.S. government be able to function normally?" said You Weiren, research manager for stocks and exchange-traded funds at FSMOne.com in Singapore. Mr. You also asked what would happen to U.S. stimulus plans, given there was no deal yet between Republicans and Democrats.

Eli Lee, head of investment strategy at Bank of Singapore, said the news had prompted a knee-jerk selloff, but the ultimate effect on the election wasn't clear.

He said one possibility was that this could help Democratic nominee Joe Biden hold on to his lead, lowering the risk of disputed election results. But he also noted that British Prime Minister Boris Johnson's popularity rose after he caught Covid-19.

Given the two candidates held a presidential debate in person, there was also a chance Mr. Biden could have been exposed to Covid-19 as well, Mr. Lee added.

In currency markets, the dollar strengthened slightly, with the ICE US Dollar index spiking to 94.03, before paring gains to stand 0.1% higher at 93.81. The Japanese yen, which tends to rally in times of market stress, strengthened to 105.137 a dollar.

Brent crude, the global gauge of crude prices, fell 3% to $39.71. The most actively traded futures contract for gold pared earlier losses to trade flat at $1,913 a troy ounce.

In Europe, indexes opened lower, with the pan-continental Stoxx Europe 600 down 1.2%. The German DAX fell 1.5% while the French CAC 40 shed 1.4%.

Stock benchmarks in Tokyo, Australia and Singapore all fell, dropping between 0.7% and 1.4%. Markets in Shanghai, Hong Kong and South Korea were closed for holidays.

On Thursday, U.S. stocks closed higher as investors gauged the prospects of an additional stimulus package. The S&P 500 rose 0.5% and the Dow Jones Industrial Average edged up 0.1%. The technology heavy Nasdaq Composite advanced 1.4%.

Write to Chong Koh Ping at [e-mail]

(END) Dow Jones Newswires

10-02-20 0328ET