Stock markets sell off after Trump coronavirus diagnosis adds to uncertainty
Stock markets around the world moved lower on Friday after word that the U.S. president has contracted the coronavirus that causes COVID-19.
In New York, the technology-focused Nasdaq was done by about 1.5 per cent, while the broader market S&P 500 held up a little better, off by about 0.5 per cent. In Toronto, the TSX’s main index was up slightly in the afternoon, after having been down by as much as 110 points or 1.5 per cent for most of the morning.
News of Donald Trump’s positive test came out overnight Thursday, and the initial market reaction was sudden and sharp, with futures selling off sharply. But by the time the trading day opened on Friday, cooler heads were starting to prevail, as losses were pared.
“The announcement has lobbed a monkey wrench into an already uncertain and volatile political environment, which not only includes the U.S. election campaign and upcoming debates, but also ongoing EU-U.K. trade talks,” said Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto.
The so-called fear gauge of Wall Street, known as the VIX, rose five per cent to 29. The VIX rises during times of uncertainty and falls when things calm down. It peaked at more than 80 in March, as the pandemic first started.
Jobs numbers discouraging
Prior to the Trump news, the biggest expected news event of the day was set to be the monthly U.S. jobs number, which showed the world’s largest economy added 661,000 jobs last month. That’s down from 1.5 million added the previous month and a discouraging sign that the economic recovery is running out of gas just as a second wave of the pandemic seems to be hitting in various places.
The unemployment rate declined to 7.9 per cent from 8.4 per cent mainly because people left the workforce, Scotiabank economist Derek Holt noted. At first blush it sounds like good news that the number of people who were on “temporary layoff” because of COVID-19 fell by more than a million, but “the issue is whether they all get called back or just get converted to permanent layoffs and whether they give up searching for work,” Holt said.
Just this week, Disney announced it is laying off 28,000 people at its various theme parks as demand for that sort of leisure activity hasn’t rebounded.
Word on Friday morning that Trump is experiencing “mild symptoms” from the virus added to the gloom and worry over the jobs report.
“It was always a big wild card in this election whether one of the candidates would contract COVID-19 thus placing the candidate on the sideline,” said oil analyst Bjarne Schieldrop with SEB Research. “The high probability of [Joe] Biden now winning the election is both bullish and bearish.”
Oil was also down, which was a drag on the TSX because so many oil companies trade there. The price of the North American crude benchmark known as West Texas Intermediate lost $1.60 US or more than four per cent to change hands at just over $37 a barrel.
There was further gloom in Canada’s oilpatch after Suncor, Canada’s biggest energy company, announced it will be laying off up to 15 per cent of its workforce over the next year and a half.