Market destabilised by Trump catching coronavirus and oil price fall

“Donald Trump catching coronavirus has put the markets in a mild state of disarray. First, the President of the United States becoming ill creates a sense of instability for markets in general. Second, it raises the question of how the Presidential election will play out – has Joe Biden also been affected, will Trump be well enough to continue the debating while self-isolating, and will the elections be postponed?” says Russ Mould, Investment Director at AJ Bell.

“One could view the market reaction as investors increasing the probability that Biden will win the election. His intention to raise taxes will not be good for corporate profits and therefore a negative for the stock market.

“Oil prices were also weak on Friday, two signals that suggest the latest decline in equity markets may not entirely be caused by Trump testing positive. This commodity is an economic bellwether and a decline in the price could be a red flag that the global economic recovery faces some near-term headwinds. Brent crude fell 2.5% to $39.92 per barrel.

“The FTSE 100 fell 0.6% to 5,841 with energy, mining and consumer cyclicals the worst performing parts of the market. Germany’s DAX index traded 0.9% lower. Pre-market indicative prices suggest a 1% to 1.2% decline for the main indices in the US when its markets open later.

“In the grand scheme of things, the scale of these declines isn’t as dramatic compared to how the markets behaved in February and March as the pandemic unfolded. It certainly isn’t time to panic.”

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