Trump Has Covid and Goes Into Quarantine.. Markets Gripped by Uncertainty

October 2, 2020

Late last evening, President Trump himself broke the news that his wife and he tested positive for the lethal coronavirus. This news comes on a day when some key markets are shut for holiday like China, Hong Kong, Taiwan, and India) and when the last U.S. monthly labor statistics prior to November’s election are to be released.

There are key unknowns regarding the president’s condition. Is he symptomatic? How long will he be in quarantine and thus off the campaign trail? How widely has his close circle been exposed? He was tested after his close aide, Hope Hicks, took sick at a Minnesota rally after flying on Air Force One with the president and many other key administration figures including Jared Kushner and Stephen Miller. Was the president already contagious at Tuesday’s debate and, if so, might he have infected Joe Biden or moderator Chris Wallace, each of whom were unmasked in that indoor auditorium? The president has pledged to continue carrying out his presidential duties, but if if becomes seriously ill, who really will be in command? How might far right-wing activists react to this uncertainty? What about Russia, which has benefited from having an ally in the White House? Will tensions between the United States and China escalate further in this time of augmented uncertainty and blame-pointing? Will the October 15th second debate between Trump and Biden have to be cancelled? What becomes of the race to install Amy Barrett on the Supreme Court before the election? How will the stalled stimulus talks between Pelosi and Mnuchin be affected?

In European stock market trading, share prices have fallen 0.9% in Germany, 0.8% in France and 0.7% in Italy and the United Kingdom. Markets in Australia, Indonesia, and Japan were up but after the Trump news fell and closed down 1.4%, 0.9% and 0.7% on the day.

The yen rose 0.4% against the dollar overnight, but the U.S. currency otherwise benefited from hot money flows fleeing risk. Dollar gains so far today have totaled 0.7% against the peso, 0.5% versus sterling, 0.3% relative to the Australian dollar and 0.3% vis-a-vis the euro, Swiss franc, and kiwi.

One of the bigger speculative moves has been a 4.1% slump in the price of West Texas Intermediate crude oil, but gold and 10-year sovereign debt yields are little changed.

The State Bank of Vietnam’s refinancing rate was sliced half a percentage point to 4.0%. Earlier cuts were engineered of 25 basis points in September 2019, then 100 bps in March and 50 bps in May. Inflation receded 0.2 percentage point to 3.0% last month, and economic activity, although remaining positive, could use more stimulus.

Japanese unemployment rose 0.1 percentage point to a 39-month high of 3.0% in August.

Japanese consumer confidence printed at a 7-month high in September but remained quite depressed nonetheless at 32.7 versus April’s low of 21.6.

The monetary base in Japan over which central banks exert the most control has accelerated to an on-year increase in September of 14.3% from 11.5% in August, 4.1% in the second quarter and 3.6% on average in 2019.

Australian retail sales fell in April for the first time since a 17.7% in plunge. Sales were 4.0% lower than July’s level but 7.1% higher than a year earlier.

Business confidence in Thailand recovered to an 8-month high in September, but incremental improvement was less than in earlier months.

The preliminary September CPI report for Euroland put inflation at a 53-month low of minus 0.3%. That’s 1.1 percentage points lower than in September 2019. Core inflation of 0.2% was less than half what analysts were forecasting. In these cautious times, Euroland’s household savings rate leaped to 24.6% in the second quarter from 16.6% in 1Q and 13.1% in the second quarter of 2019.

France’s government budget deficit over the first eight months of 2020 was 34% larger than a year earlier.

U.S. releases today included the aforementioned monthly report on the labor market situation, factory orders, and the New York regional PMI, known as the NAPM index.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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