Uncertainty has risen to its peak for US investors which were already anxious because of the current pandemic, slow economic recovery, stalled talks on fresh US stimulus and forthcoming elections after President Trump announced that he has contracted positive for Covid 19. And on the announcement, while some asset class saw a blow others gained investors' interest as a safe haven.
Here is detailed the impact which different asset class recorded:
On Friday, US markets jolted with the highest downside seen in the Nasdaq index of 2.22%, while S&P 500 and Dow Jones also suffered losses of 0.96% and 0.48%, respectively. But, the fall in indices post the disclosure by Trump of his illness is viewed as a more muted impact on the Wall Street when compared to previous Presidential health scares.
"It's less of an event than you might think because it hasn't come out of the clear blue sky, it's just come in the midst of other confusion," said Charles Geisst, a market historian and emeritus professor of finance at Manhattan College. "This sort of stuff is just not unexpected anymore. It's just par for the course this year."
In the past when some top US government official reported some health issue or met an unforeseen event, stock markets slid by as much as 6.6% like in September 1955 when President Dwight D. Eisenhower suffered a heart-attack. Also, on similar announcement stock markets even halted for trading as in 1981 when the then President Ronald Reagan was shot.
There was seen an immediate spike in gold prices as investors took to the safe haven appeal of the precious yellow-metal after Trump was diagnosed with Covid 19. Spot gold was up 0.5% at $1,915.34 per ounce by 0645 GMT, U.S. gold futures also surged 0.3% to $1,922.20.
Gold is on course for its best week in nearly 2 months, gaining as much as 2.9% for the week ended October 2, 2020. In India, commodity market was closed on Friday on account of Mahatma Gandhi Jayanti. Gold on the MCX on Thursday settled higher by a tad Rs. 66 or 0.13% at Rs. 50470 per 10gm. Spot gold price of 22K and 24K gold on Saturday is Rs. 49300 and Rs. 50,300 per 10 gm, respectively.
Oil in Friday's session suffered huge losses to the extent of 3 percent as Trump's disease came as another blow at a time when global crude output is rising signalling another concern for the markets ravaged by Covid 19 pandemic. Brent crude went down by 2.7% to $39.81 per barrel by 11:32 am EDT, after hitting day's low of $38.79 per barrel. And US crude fell 2.7 percent to $37.67 per barrel. US oil and brent crude is on course for its second weekly decline with fall of 6% and 5%, respectively.
President's disease seen to be positive for markets
Nonetheless, President Trump's getting Covid 19 is seen to be positive for the stock markets by Tom Lee as he expects that skeptics of the disease may now adhere to social distancing and mask wearing protocols and in turn lessen the intensity of the virus spread, enabling faster and safer re-opening of the economy.
How will equity, gold perform in India?
There is a divided view over the impact of Trump's catching the virus on the markets as some analyst also warn of a deeper sell-off to the extent of 10% as the markets hate uncertainty which is at its peak now. And this will have an rub-off effect on Asian markets which may be dragged lower for the rest of the year.
So, Indian markets being no exception will also bear the likely shock, as it is some experts do not see current levels on Indian indices to sustain through the next year.
Gold prices in India which move in tandem with international rates will be pushed higher with global rates now trading again above $1900 per ounce price. Also, if the dollar loses steam which has currently gained on account of risk aversion due to some or the other reason, a greater rally in gold cannot be ruled out in days to come.