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Trump's positive COVID-19 test sends investors running for cover

LONDON, Oct 2 (Reuters) - President Donald Trump’s positive coronavirus test triggered a stock market sell-off and a move into government bonds on Friday as uncertainty spiked only a month before the U.S. election.

U.S. stock futures fell more than 1% in London, while government bond yields slid as investors assessed the impact of the president’s illness and quarantine for financial markets.

Investors, who have driven a long rise in global equity markets, were already nervous given the lack of progress on more U.S. fiscal stimulus.

Stock market volatility gauges rose, with the widely-watched VIX index up to nearly 29 points, from around 27 points on Thursday.

“The President of the United States has got a disease which kills people. People are de-risking because of that,” Chris Weston, head of research at Pepperstone in Melbourne, said

Trump’s diagnosis comes at a particularly sensitive point in the election after this week’s acrimonious presidential debate.

“This does damage Trump’s ability to campaign and time is running out before the election,” Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo, said.

Meanwhile, yields on 10-year U.S. Treasury bonds fell more than 1 bps to 0.66%, just above a one-month low, a classic signal of investors seeking so-called safe havens.

Risk aversion was evident in the currency markets, with the Chinese yuan traded offshore under particular pressure.

Reporting by Saikat Chatterjee; Editing by Alexander Smith