GLOBAL MARKETS-Risk aversion sets in after Trump tests positive for coronavirus

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog: LIVE/

By Tom Arnold and Elizabeth Howcroft
LONDON, Oct 2 (Reuters) - A wave of risk aversion swept
markets on Friday after U.S. President Donald Trump said he and
his wife had tested positive for COVID-19 and will isolate,
weeks ahead of the elections.
Shortly before 0500 GMT, Trump said on Twitter that he and
his wife had been tested for coronavirus after Hope Hicks, a
senior advisor who recently traveled with the president, tested
positive.
He later tweeted he and the first lady had tested positive:
"We will begin our quarantine and recovery process immediately,"
he said. U.S. stock futures fell on the news EScv1 NQc1 and
Treasury yields dipped. Analysts said the initial risk-off moves were a knee-jerk
reaction. As European markets opened, the move in U.S. stock
futures pulled back slightly. At 0735 GMT, S&P 500 futures were down 1% EScv1 . Futures
for the tech-heavy Nasdaq fell 1.2% NQc1 .
European shares opened lower. At 0736, the STOXX 600 was
down 0.5% .STOXX and London's FTSE 100 was down 0.7% .FTSE ,
already recovering from their initial losses.
The MSCI world equity index, which tracks shares in 49
countries, was down 0.2% at 0736 GMT .MIWD00000PUS .
Trump's exposure could cause a new wave of market volatility
as investors braced for the presidential election in November.
How long the risk-averse moves will last depends on the extent
of the infection within the White House, said Francois Savary,
chief investment officer at Swiss wealth manager Prime Partners.
"We may have to wait until the end of the weekend for more
clarity on the situation," he said. "The reaction has been a bit
excessive with U.S. stock futures. It doesn't mean the U.S.
administration is not able to function."
"It will weigh on market today and early next week but will
not induce a long-lasting correction if the infection is
contained to Trump," he added.
Immediately after the news, the U.S. dollar index rose and
the safe-haven yen made its biggest jump in more than a month,
reaching 104.95 at 0553 GMT JPY=EBS .
Within 10 minutes, the dollar changed course and started
falling. Versus a basked of currencies, it was at 93.759 by 0737
GMT. The yen stabilised as European markets opened, at 105.185 at
0737 GMT. The Australian dollar, which serves as a liquid proxy
for risk, recovered some losses against the U.S. dollar as the
moves pulled back AUD=D3 .
The euro was down 0.2% against the dollar, at $1.1721
EUR=EBS .
Germany's benchmark 10-year bond was down less than 1 basis
point at -0.539% DE10YT=RR .
Oil fell, with Brent crude LCOc1 down 2.6% at $39.85 a
barrel at 0724 GMT, after falling overnight and stabilising
somewhat early in the European session. Gold rose, as investors flocked to safer assets.
The impact on the U.S. elections is unclear. Even before
news of Trump's infection, markets had been more bearish after
Washington failed to reach an agreement on a fiscal stimulus
package to help the U.S. economy recover from the impact of
coronavirus. The last round of monthly U.S. unemployment data before the
elections is due later in the session, although analysts say
this has been relegated to secondary importance.

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