October 05, 2020: Stock markets bounced back Monday on reports suggesting Donald Trump's health had improved after his positive test for the coronavirus, with traders also cheered by signs that U.S. lawmakers were edging towards agreement on a new stimulus package.

Global equities had sunk sank Friday after the White House announced Trump's diagnosis, created more uncertainty a month before the November 3 presidential election, some commentators even questioning whether the vote would actually take place.

Oil prices also began recovering Monday after last week's heavy losses. West Texas Intermediate and Brent prices rose almost six percent on optimism over Trump's health, improved appetite for risk and a strike at six offshore oil and gas fields in Norway.

The dollar traded mixed as the Dow Jones had added 1.3 percent two hours in, largely mirroring main European indices.

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.

Craig Erlam, OANDA senior market analyst, took a cautious line, warning that “the downside risks aren't just consigned to the US either, far from it (as) the UK is currently heading for a no-deal Brexit”.

Optimism over the health of President Trump “has encouraged traders to buy back into the market”, said CMC Markets analyst David Madden.

“Over the weekend, Mr Trump expressed his desire for Republicans and Democrats to compromise and make a deal with respect to the proposed coronavirus relief package.”

Analysts said that could help jolt congressional leaders to increase their efforts for a second economic rescue package. “This kind of changes the dynamic,” said House Speaker Nancy Pelosi.

Trump urged lawmakers to reach a deal. “OUR GREAT USA WANTS AND NEEDS A STIMULUS,” he tweeted from hospital. “WORK TOGETHER AND GET IT DONE! Thank You!”

– Package potential –

Pelosi and Treasury Secretary Steven Mnuchin have held a series of talks to try to agree a spending plan, but the Democrats' $2.2 trillion proposal is around $600 billion more than what Republicans want.

If there is no pre-election stimulus agreement, ThinkMarkets analyst Fawad Razaqzada suggested that a Joe Biden win might mean “the Democrats could then pass their original $3.4 trillion stimulus in January … a much bigger package than would be possible in a potential bi-partisan agreement pre-election.

“So, although Trump is widely seen as business- and market-friendly, this may explain why investors do not appear to be too concerned about the rising probability of Biden winning the election, at least in so far as the short-term is concerned.”

Observers said the markets were largely pricing in a Biden victory and a clean sweep for Democrats in House and Senate polls, accounting for expected higher taxes and regulations.

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.

– Key figures around 1550 GMT –

• New York – Dow Jones: UP 1.3 percent at 28,055.42
• London – FTSE 100: UP 0.7 percent at 5,942.94 points (close)
• Frankfurt – DAX 30: UP 1.1 percent at 12,828.31 (close)
• Paris – CAC 40: UP 1.0 percent at 4,871.87 (close)
• EURO STOXX 50: UP 1.0 percent at 3,221.80
• Tokyo – Nikkei 225: UP 1.2 percent at 23,312.14 (close)
• Hong Kong – Hang Seng: UP 1.3 percent at 23,767.78 (close)
• Shanghai – Composite: Closed for a holiday
• Euro/dollar: UP at $1.1784 from $1.1716 at 2100 GMT
• Dollar/yen: UP at 105.66 yen from 105.29 yen
• Pound/dollar: UP at $1.2972 from $1.2935
• Euro/pound: UP at 90.86 pence from 90.58 pence
• West Texas Intermediate: UP 5.9 percent at $39.24 per barrel
• Brent North Sea crude: UP 5.3 percent at $41.36
• AFP/APP

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