Markets recover following Trump slump

US stock markets fell on Friday on news that Donald Trump and the First Lady had tested positive for coronavirus weeks before the election; all three main indexes – the Dow Jones, the S&P 500 and the Nasdaq – fell between 1% and 2.2% in early trade.

However, hopes of an aid package for the aviation industry improved the mood after Democrat Nancy Pelosi said relief was ‘imminent’.

Ms Pelosi , who as Speaker of the House of Representatives would take the reins if Messrs Trump and Pence were incapacitated by the virus, had previously called for a comprehensive aid bill, and said Congress was now prepared to advance support focused on the airlines which had warned they would be making  30,000 job cuts.

‘We will either enact stand-alone legislation or achieve this as part of a comprehensive negotiated relief bill, extending for another six months the Payroll Support Program,’ Ms Pelosi said in a statement. ‘As relief for airline workers is being advanced, the airline industry must delay these devastating job cuts.’

Shares in the two companies that would have made the bulk of the cuts, United and American, took off on the news, each ending the day up more than 2%.

These gains helped lift shares elsewhere, with the exception of the tech-focused Nasdaq. The Dow Jones closed 0.48% lower, the S&P 500 index dropped 0.9%, and Nasdaq fell 2.2%.

In London, the FTSE 100 index recovered from early falls, closing up nearly 0.4% at 5,902.1; in France, the Cac-40 was flat, while Germany’s Dax index fell 0.3%.

US stocks have been remarkably resilient in the face of economic and political uncertainty, the main US indexes approached or passed their pre-pandemic highs during the summer.

However, there have been signs of increasing nervousness in markets as the US jobs recovery lost momentum and Washington became bogged down in debate over additional coronavirus spending.

Political uncertainty has come from the fact that Mr Trump has refused to say that he would accept the final result of the election, leading to fears that the outcome may not be known for months; him testing positive for coronavirus will compound political jitters, although it is a moot point whether it will help or hinder his chances on November 3^rd.  More than a million votes have already been cast.

Markets are already fretting about an uncertain election and Mr Trump’s illness adds another layer of uncertainty; however, Ms Pelosi, who has been leading negotiations with the White House over a stimulus package said that she hope the news had ‘changed the dynamic’ on the talks and that a wider compromise could be reached.

Democrats have called for more money than Republicans; Ms Pelosi said the two sides remain divided on issues such as funding for state and local governments and unemployment insurance.