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(Alliance News) - Stocks in London were firmly in the red at midday on Friday after US President Donald Trump tested positive for the coronavirus, while focus turns to the closely-watched US jobs report.
Trump, 74, first announced on Twitter that he and First Lady Melania Trump, 50, had tested positive for the virus.
The extraordinary setback for Trump had immediate political consequences one month before election day, forcing him to cancel campaign trips and adding new volatility to a contest already steeped in tension.
The large-cap FTSE 100 index was down 61.89 points, or 1.0%, at 5,817.56. The mid-cap FTSE 250 index was down 165.52 points, or 1.0%, at 17,217.94. The AIM All-Share index was down 0.5% at 960.11.
The Cboe UK 100 index was down 1.0% at 576.92. The Cboe 250 was down 0.9% at 14,592.42 and the Cboe Small Companies was down 0.2% at 9,223.05.
In mainland Europe, the CAC 40 in Paris was down 1.0% while the DAX 30 in Frankfurt was 0.9% lower.
Analysts at BK Asset Management said: "Analysts have pointed out that infected patients 74 years of age or older have a 34% chance of hospitalisation and complications increase with commodities such as obesity – all of which put the president at high risk. From a medical point of view, the period of greatest concern is about one week from infection when severely ill patients develop pneumonia from the virus infection. If the president can avoid that scenario his chances for speedy recovery will rise markedly.
"Regardless of the medical prognosis, the president will be sidelined for two weeks during the final month of an increasingly bruising election campaign which he is already losing in the polls. Although some betting markets have now pushed the chances of a Biden Presidency to 90% the fact of the matter is no one actually knows how this latest wrinkle of fate will play out. A swift recovery could usher in a wave of sympathy and reaffirm president's laissez-faire attitude towards the virus and shift sentiment his way in key battleground states. A severe bout and possibly even hospitalization would not only endanger his life but his political chances as well."
US stock market futures were trading lower on Friday. The Dow Jones Industrial Average was called down 1.2%, the S&P 500 down 1.3%, and the Nasdaq Composite down 1.7%.
Trump's challenger, Democrat Joe Biden, is well ahead in the polls and has made criticism of the Republican's handling of the coronavirus - and frequent downplaying of the pandemic's seriousness - a key issue among voters.
The FiveThirtyEight.com polling average shows Biden leading Trump 50.2% to 42.2%. This steady lead has been consistent throughout the month of September, the polling data showed.
Trump, in response, has been betting on an ever more aggressive schedule of campaign rallies around the country. The events, which he says prove his true political strength, bring together thousands of people, often without masks and sometimes in contravention of local rules.
The White House has cancelled a planned campaign rally in the crucial swing state of Florida on Friday. In addition, it looks highly likely that Trump will have to cancel a slew of other trips on the campaign trail in key battleground states including Wisconsin and Arizona.
It also places more emphasis on the upcoming vice-presidential debate in Salt Lake City, Utah between Vice President Mike Pence and Biden's running mate Kamala Harris, should Trump not be able to contend the election due to health issues.
"The reason for the move is that Democratic presidential candidate Joe Biden's odds to win the US presidential election have surged which markets interpret as negative for risk. As we await further news on the matter and potentially additional consequences on the US election campaign, this will make for a choppy session before the US nonfarm payroll report, the last hurdle for risk before the weekend," said Saxo Markets sales trader Olivier Konzeoue.
On the London Stock Exchange, Rolls-Royce was the worst blue-chip performer, down 9.5% extending losses from Thursday following the jet engine maker's capital raise plans.
Rolls-Royce on Thursday launched plans to boost its finances by GBP5.0 billion in a bid to bolster its balance sheet in the face of the coronavirus crisis. The stock closed down 10% on Thursday.
Goldman Sachs and Morgan Stanley, who are advising Rolls-Royce on its GBP5 billion debt and equity issue plans, have cut their underwriting exposure to the fundraising due to the Covid-19 led market volatility and the US presidential elections, the Financial Times reported, citing several sources.
The major US investment banks, along with Rolls-Royce's house broker Jefferies, had originally committed to underwrite 60% of the 6.4 billion new Rolls-Royce shares to be issued in the 10-for-three cash call. The total commitment is now closer to 30%, the newspaper reported.
In the FTSE 250, James Fisher & Sons was up 2.7% after the marine services provider said it has been awarded a five-year service contract with the Royal Navy.
The "multi-million-pound" contract is for ensuring operational readiness of life-support diving equipment and was awarded to James Fisher's JFD specialist technical business.
At the other end of the midcaps, Centamin was by far the worst performer, down 19%. The gold miner it will defer open pit mining operations in the Stage 4 West wall of the open pit at its Sukari gold mine in Egypt after detecting movement in a localised area of waste material.
For the three month ended September 30, preliminary gold production was around 120,000 ounces, taking nine-month production to about 375,000 ounces. Centamin's preliminary estimate is that fourth quarter production will be reduced to around 70,000 ounces.
Gold was quoted at USD1,907.81 an ounce Friday midday, slightly lower from USD1,910.51 late Thursday, holding around the USD1,900 mark amid Trump's health concerns as well as wider fears surrounding the economic recovery.
"Gold has benefited from the uncertainty sparked by the coronavirus. It is often considered the ultimate inflation-linked instrument, but as it does not pay any interest, it carries a zero coupon. Investors also have to account for ongoing storage costs which, over time, reduces potential returns slightly," explained Aegon Asset Management's Jan van der Mark.
The euro stood at USD1.1720, down from USD1.1745 at the European equities close Thursday. Against the yen, the dollar was trading at JPY105.14, down from JPY105.58.
On the economic front, eurozone consumer prices fell deeper into deflationary territory in September, data from Eurostat showed.
Euro area annual deflation is expected to be 0.3% in September, down from 0.2% in August, according to a flash estimate from Eurostat, which is way off the official target of just under 2% inflation.
The decline was driven by a drop in core inflation, which fell further to 0.2% from 0.4%.
Brent oil was trading at USD39.09 a barrel on Friday midday, down sharply from USD40.13 at the London equities close Thursday.
"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," noted AJ Bell's Russ Mould.
The pound erased early morning losses, quoted at USD1.2925 on Friday at midday, up from USD1.2889 at the London equities close on Thursday, as investors reacted positively to the latest Brexit development.
UK Prime Minister Boris Johnson will hold emergency talks with European Commission President Ursula von der Leyen over the weekend to take stock of negotiations on a post-Brexit free trade deal.
The two leaders will speak on Saturday to discuss the "next steps" following the conclusion of the final formal round of talks in Brussels.
The chief negotiators Michel Barnier and Lord Frost were meeting on Friday in the Belgian capital at the end of a week of talks.
On Thursday, von der Leyen said a "letter of formal notification" would be sent to the UK after ministers rejected a demand to withdraw the provisions from the controversial UK Internal Market Bill by Wednesday.
Ahead of the New York market open on Friday the closely-watched US jobs report for September is due at 0830 local time, or 1330 BST.
The US economy is expected to have added 850,000 jobs, down from 1.4 million jobs added in August, while September's unemployment rate is forecast to ease to 8.2% from 8.4% in August.
CMC Markets analyst Michael Hewson commented: "President Trump will be hoping for a decent number in order to make the point that the US economy is continuing to recover from its Covid shock, in line with last months August report which continued the trend of a slow a recovery in the US jobs market, with the unemployment rate falling to 8.4%, and its lowest level since the post lockdown spike to 14.7% in April.
"While this is welcome, we can't ignore the fact that the US labour market looks a radically different beast to the one we saw earlier in the year. We can't even be sure that the unemployment rate is an accurate reflection of what is going on around the US as a whole."
On the US corporate front, Walmart will be in focus after the Bentonville, Arkansas-headquartered retailer accepted a bid for UK grocer Asda, led by Lancashire-based brothers Mohsin and Zuber Issa following a lengthy auction process.
The billionaire brothers behind petrol forecourt firm EG Group and private equity firm TDR Capital have won the GBP6.8 billion takeover battle for the supermarket chain. Walmart will retain a minority stake in Asda as part of the agreement.
Walmart was down 1.7% in pre-market trade.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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