Asian markets rallied Monday following reports suggesting Donald Trump’s health is improving after he tested positive for the coronavirus last week, with traders also cheered by signs that US lawmakers were edging towards agreement on a new stimulus package.
World equities went into reverse Friday after the White House announced the president and his wife’s diagnosis, which fanned fresh uncertainty just a month before the November 3 election, with some commentators questioning whether the vote would actually take place.
But after spending the weekend in hospital — with conflicting reports about the severity of his condition — Trump’s medical team said he had “continued to improve” and could return home as early as Monday.
Analysts said the episode could help jolt congressional leaders to up their efforts for a second economic rescue package, with House Speaker Nancy Pelosi saying: “This kind of changes the dynamic.”
Trump urged lawmakers reach a deal, tweeting from his hospital bed: “OUR GREAT USA WANTS AND NEEDS A STIMULUS. WORK TOGETHER AND GET IT DONE! Thank You!”
Pelosi and Treasury Secretary Steven Mnuchin have held a series of talks aimed at matching up their spending plans, with the Democrats’ $2.2 trillion proposal around $600 billion more than what Republicans are willing to stump up.
Even Senate Majority Leader Mitch McConnell, who has often been hostile to most Democrat offers, offered a hopeful tone Friday, saying: “I think we’re closer to getting an outcome.”
The need for a fresh package was highlighted Friday by data showing the US economy created fewer jobs than expected in September, highlighting the recovery enjoyed through summer was stuttering.
– ‘Only certainty is the uncertainty’ –
“The dramatic turn of events may be a catalyst for a stimulus agreement — or it may not; we wait for bills to be put to Congress and votes to be taken,” wrote Julian Emanuel of BTIG.
“With key economic data extending its run of disappointments versus expectations and high-profile corporate layoffs, additional aid would seem imperative.”
Hong Kong, which reopened after a four-day weekend, rallied more than one percent along with Tokyo and Seoul, while Sydney piled on more than two percent and Singapore put on 0.9 percent.
Taipei, Jakarta and Wellington were also in the green. Shanghai remained closed for a public holiday.
Observers said markets are largely pricing in a Joe Biden victory over Trump next month and a clean sweep for Democrats in House and Senate polls, despite expectations of higher taxes and regulations.
But Axi strategist Stephen Innes warned of more bumps in the road ahead: “With just weeks ahead of the US election, the only certainty is the uncertainty of what lies ahead.”
“In the near term, the president’s health situation may increase the likelihood of a contested result and all the adverse knock-on effects in times of uncertainty and heightened volatility after polling day,” he added.
“In essence: As long as President Trump is still fighting Covid-19, everything else is of secondary importance. The health of the president will matter to both the polls and risk sentiment in general.”
The more positive outlook for Trump’s health lifted riskier assets, with higher-yielding currencies up against the dollar, while key safe havens yen and gold retreated.