Global, UAE markets: US President’s COVID-19 diagnosis spooks, but not for long

After Trump, the First Lady and close aide Hope Hicks tested positive, analysts noted how markets will view any implication this can have on the US election that's just a month away, whether the government operates as usual despite the US President being admitted to hospital, and any effects this has on the US stimulus package talks.

Possible game-changer?

“We suspect the latter two will be unaffected, as (UK Prime Minister) Boris Johnson was still able to perform his duties when he tested positive for COVID-19 back in April,” opined Rony Nehme, chief market analyst at Squared Financial.

“However, how Trump recovers from COVID-19 could be a game changer for the election,” Nehme added. “If he recovers quickly, he was right about the virus, which will be a big boost for his campaign. If he becomes very ill, even with the sympathy vote, it will show his approach to the pandemic was misjudged.”

US stock indexes initially tumbled on Friday in reaction to the news, but clawed back some of those losses, as a general view among market strategists is that Trump testing positive does little to change the typical dynamic between markets and presidential elections.

Heavyweights lead declines

The Nasdaq 100 led losses amid declines for tech companies including Apple, Microsoft and Amazon.com. The heavyweight stocks also dragged down the S&P 500 Index, even as most stocks on the gauge gained.

A disappointing jobs report that showed less hiring than analysts had estimated underscored the urgency to push through an aid measure, and stocks were pushed around by conflicting signals on the prospects for reaching a compromise in Washington.

Crude oil too tumbled for a second day last week. The yen, often seen as a haven in times of market stress, edged higher amid the increased uncertainty in the runup to the November 3 presidential election.

Market volatility spikes

Traders had already been bracing for turmoil ahead of the ballot and in the months afterward, and the CBOE Volatility Index, known as Wall Street’s fear gauge, jumped the most in a month at one point Friday before paring most of the increase.

Market participants had already been bracing for the possibility that the Biden-Trump race could lead to a contested outcome, where the candidate who doesn’t win opts not to concede defeat, and the lack of a more pronounced reaction in so-called safe-haven assets may account for that, experts said.

Jefferies analyst Sean Darby said that investors should not be panicking about Trump’s diagnosis and believes some of the selling in the stock market, which was staging a mini recovery at midday Friday, is overdone.

Dubai index drops, Kuwait rebounds

Tracking a troubled macro sentiment, the Dubai bourse benchmark started the week in negative territory, while broad-based gains pushed Kuwaiti shares higher as the bourse reopened after a two-session break following the death of its Emir.

Dubai’s main share index (DFM) dropped 0.9 per cent, pressured by a 1.2 per cent fall in Sharia-compliant lender Dubai Islamic Bank and a 1.4 per cent drop for Emaar Properties. Meanwhile, the Abu Dhabi index (ADX) traded flat, with the top lender First Abu Dhabi Bank firming by 0.2 per cent.

After Kuwait’s 91-year old Emir Sheikh Sabah al-Ahmad al-Sabah died on Tuesday, trading was halted on the benchmark for two sessions, after which it opened up 2.7 per cent as most of its constituents rebounded from Tuesday’s losses, with heavyweight National Bank of Kuwait (NBK) gaining 2.9 per cent.

As global markets dropped, the stance was reflected in other GCC stocks markets as well. Saudi Arabia’s benchmark index (TASI) was down 0.3 per cent, with oil giant Saudi Aramco shedding 1.4 per cent, and in Qatar, the index (QSI) eased 0.4 per cent, weighed down by Commercial Bank’s 2.3 per cent decline.