Stock markets rebound on Trump health, stimulus hope
London (AFP) – Stock markets bounced back Monday on reports suggesting Donald Trump’s health is improving after the US president tested positive for the coronavirus, with traders also cheered by signs that American lawmakers were edging towards agreement on a new stimulus package.
Global equities sank Friday after the White House announced Trump’s diagnosis, which fanned fresh uncertainty a month before the November 3 presidential election, with some commentators questioning whether the vote would actually take place.
Oil prices also began staging a recovery after last week’s heavy losses, with West Texas Intermediate and Brent prices rising around five percent on optimism about Trump’s health, while the dollar traded mixed as the Dow Jones and the tech-rich the tech-rich Nasdaq added one percent shortly after the opening.
After spending the weekend in hospital — with conflicting reports about the severity of his condition — Trump’s medical team said he had “continued to improve” and could return home as early as Monday.
“Stock markets in Europe are showing respectable gains… on the back of the optimism surrounding the health of President Trump,” said CMC Markets analyst David Madden.
“At the end of last week, it was announced that the US leader tested positive for Covid-19 and that hurt market confidence. In a video, the Donald said he was receiving ‘great reports from the doctors’, and that has encouraged traders to buy back into the market.
“Over the weekend, Mr Trump expressed his desire for Republicans and Democrats to compromise and make a deal with respect to the proposed coronavirus relief package.”
Analysts said the episode could help jolt congressional leaders to up their efforts for a second economic rescue package, with House Speaker Nancy Pelosi saying: “This kind of changes the dynamic.”
Trump urged lawmakers to reach a deal, tweeting from hospital: “OUR GREAT USA WANTS AND NEEDS A STIMULUS. WORK TOGETHER AND GET IT DONE! Thank You!”
– Package potential –
Pelosi and Treasury Secretary Steven Mnuchin have held a series of talks aimed at matching up their spending plans, with the Democrats’ $2.2 trillion proposal around $600 billion more than what Republicans are willing to stump up.
If there is no pre-election stimulus agreement, ThinkMarkets analyst Fawad Razaqzada indicated that a Joe Biden win might mean “the Democrats could then pass their original $3.4 trillion stimulus in January … a much bigger package than would be possible in a potential bi-partisan agreement pre-election.
“So, although Trump is widely seen as business- and market-friendly, this may explain why investors do not appear to be too concerned about the rising probability of Biden winning the election, at least in so far as the short-term is concerned.”
The need for a fresh package was highlighted Friday by data showing the US economy created fewer jobs than expected in September as the recovery enjoyed through summer stutters.
Observers said markets are largely pricing in a Biden victory and a clean sweep for Democrats in House and Senate polls, despite expectations of higher taxes and regulations.
The more positive outlook for Trump’s health lifted riskier assets, with higher-yielding currencies up against the dollar, while key safe havens yen and gold retreated.
– Key figures around 1400 GMT –
New York – Dow Jones: UP 0.9 percent at 27,937.89
London – FTSE 100: UP 0.6 percent at 5,938.25 points
Frankfurt – DAX 30: UP 0.9 percent at 12,798.35
Paris – CAC 40: UP 0.8 percent at 4,864.35
EURO STOXX 50: UP 0.7 percent at 3,214.73
Tokyo – Nikkei 225: UP 1.2 percent at 23,312.14 (close)
Hong Kong – Hang Seng: UP 1.3 percent at 23,767.78 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: UP at $1.1767 from $1.1716 at 2100 GMT
Dollar/yen: UP at 105.57 yen from 105.29 yen
Pound/dollar: UP at $1.2974 from $1.2935
Euro/pound: UP at 90.70 pence from 90.58 pence
West Texas Intermediate: UP 5.1 percent at $38.93 per barrel
Brent North Sea crude: UP 4.5 percent at $41.03
Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.