Trump, Virus and the Stop press moment

Last time we had written this newsletter on Thursday owing to a public holiday on Friday. The most important data which was expected to make some noise over the long weekend was the US NFP data which gets released every first Friday of the month. But then the world had its “stop press” moment with the news of President Trump testing positive for corona virus late on Thursday late night in the US. He then checked into the Walter Reed medical facility in Washington. Though still under the quarantine regime, he made a public appearance yesterday greeting his supporters from his motorcade.

The news that the NFP data was below expectations and the second stimulus discussion are still a way from being concluded has suddenly been relegated to the margins with the Trump virus announcement completely hogging the limelight. With the US elections just a month away, the outcome of the hospitalization stay of the President (either way) has potential to sway the public mood in a much greater way compared to any public debates and policy measures. Numerous opinion polls have started to check the temperature of the public on this issue. Trump himself has tweeted results of some of these.

At our end, let’s take a temperature check of the markets and see how they reacted and are reacting to this news. The Dow Jones was down by half a percent in trading on Friday. The Dollar Index is trading at 93.70 whereas US 10 year yields are up and trading at 0.71 currently. The Hang Seng and Nikkei are up more than 1% in trading today. Gold is stable at 1890$/oz. Offshore Chinese Yuan at 6.75. Emerging market pack like INR,ZAR and BRL are trading firm against the dollar.

So all in all it can be concluded that the market is not perceiving any risk off kind of scenario which requires any knee jerk adjustment in their exposures. The statement from the hospital that the US President might be discharged on Monday itself is also having a salubrious effect on the risky assets. In case this happens one can expect a rally in risk on assets. Any quick recovery will also help Trump in future debates where he can use it to counter any allegations that he failed to act early (read Feb 2020) in response to the corona pandemic. But all this is conjecture and as they say “don’t say its over till the fat lady sings”. Hospital discharge is the proverbial fat lady here.

Domestically the equity markets are trading strong, the rupee is at 73.11 which is close to its strongest in a month and the 10 year benchmark bond yield is trading close to 6%.