Friday, December 3

Donald Trump’s positive COVID test triggers sell-off in stocks and oil as investors flee risk

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And in a sign of further uncertainty after the Nov. 3 US election, the premium of the November futures contract on the VIX widened over its December counterparts

There was a similar story in currency markets with one-month dollar-yen implied volatility gauges rising to more than one-month highs near 7.5 per cent. Australian dollar volatility indicators also ticked higher.

Arnaud said that he was positioned for uncertainty in the coming weeks by increasing exposure to safe-haven assets such as the US dollar, Japanese yen and US Treasuries.

US stock futures fell nearly 2 per cent in London before trimming some losses, while government bond yields slid as investors assessed the impact of the president’s illness and quarantine for financial markets.

While MUFG strategists said Trump’s diagnosis could strengthen his argument of opening up the US economy if he recovers quickly some like Saxo Bank say Biden’s chances of a win had jumped, a negative for risky assets.

Betfair suspended betting on the outcome of the US election on Friday, its website showed. Betfair had Biden’s probability of winning at 60 per cent on Wednesday after the first debate.

Investors, who have driven a long rise in global equity markets, were already nervous given the lack of progress on more US fiscal stimulus and a brief selloff in high-flying US technology shares last month.

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

“Whether it’s Trump or Biden, the biggest problem is uncertainty. As long as we’re uncertain about who will win the election, it is difficult for markets to truly settle,” Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo, said.

© Thomson Reuters 2020