US stock market to fall further after Trump tests positive for coronavirus: analyst

Source: Global Times Published: 2020/10/2 17:23:10

Photo taken on May 26, 2020 shows the trading floor of the New York Stock Exchange in New York, the United States. The New York Stock Exchange (NYSE) partially reopened its iconic trading floor on Tuesday after a two-month closure due to the COVID-19 pandemic. (Courtney Crow/NYSE/Handout via Xinhua)

US stock futures plunged on Friday morning shortly after US President Donald Trump tweeted that he and first lady Melania Trump “tested positive for COVID-19”. All three major stock futures fell over 2 percent on midday Friday, and the yield on the 10-year Treasury note fell to 0.658 percent.

Analysts believe that Trump's positive test results will increase the risk aversion in the US market and the stock market will fall further, as the attention of US investors will be again drawn into the seriousness of the COVID-19 pandemic. 

Trump said in the tweet that he would undergo a “quarantine and recovery process” with the first lady.

"Neither the stock market nor the economy in the US is expected to be optimistic in the fourth quarter of this year. The sell-off on the stock market was not only triggered by the fact that Trump has been infected of coronavirus, but also by pessimism about the severity of the epidemic and the poor expectations of a full return to work in the US," Hu Qimu, a senior fellow at the Sinosteel Economic Research Institute, told the Global Times on Friday.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act has meaned that all unemployed workers would receive an extra $600 a week for up to six months starting from March, and it officially ended on July 31, according to the US Department of Labor. 

It could add insult to injury, as Hu added that the US faces a wave of job cuts starting in October, and it won't be easy for the two parties to agree on a new bailout plan during the presidential election. 

One example of such a dilemma could be the $2.2 trillion economic stimulus package, passed by the Democrats in the House of Representatives on Thursday, which has since been rejected by the Republicans.

"In any case, Trump's campaign is more uncertain. If Joe Biden is also diagnosed with COVID-19, the market will become more pessimistic about the US economy. There may be a large number of investors liquidating their US assets to reallocate in China to avoid risk," Hu noted.


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