Global shares and oil hammered after Trump tests positive for COVID-19, sparking safe-haven rush

• US stock futures tumbled 2% early Friday after President Donald Trump tested positive for COVID-19, while volatility spiked ahead of a key employment report.
• Gold and US Treasurys rallied as investors sought stability in safe-haven assets, while oil and cryptocurrencies dropped sharply.
• "The initial negative market reaction market implies that volatility will remain elevated as a result," ADM Investor Services chief global economist Marc Ostwald said.

Global stock markets and oil slid on Friday, while gold rallied after US president Donald Trump said he and his wife had tested positive for coronavirus, sparking a rush to safe-haven assets and a jump in overall volatility.

US futures on the S&P 500, Dow Jones and Nasdaq 100 traded around 1.3-1.9% lower, suggesting the major indices will fall at the start of trade later on Wall Street, while oil suffered the heaviest blow, sliding by more than 4%, as investors fled risk-linked assets ahead of a key monthly report on unemployment.

The US dollar came under pressure immediately after the news, but pared losses to trade roughly flat against a basket of major currencies by midday in Europe, to the benefit of typical safe-haven assets such as the Japanese yen, gold and US Treasuries.

Trump, who faced off against Democratic rival Joe Biden in a televised debate on Tuesday, got tested for the disease along with his wife, Melania, after his close confidant and White House counselor, Hope Hicks, tested positive earlier this week.

"News of Trump's testing positive for Covid-19 test throws a spanner in the pre-election process, as it clearly limits his ability to campaign for the presidency, and the initial negative market reaction market implies that volatility will remain elevated as a result," ADM Investor Services chief global economist Marc Ostwald said.

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European indices fell across the board, with the FTSE 100, the DAX and the CAC 40 all down between 0.9-1.0%, led by losses in the chemical, energy and industrial materials sectors.

The dollar index traded 0.1% up on the day around 93.81, having fallen back from an earlier intraday high of 94.03.

There was already an air of caution across US financial markets prior to the news of Trump's test, given the release at 8:30 am ET on Friday of the last monthly employment report before the November 3 election.

The economy is expected to have added 850,000 workers to US non-farm payrolls in September, down from August's 1.371 million rise. This would be the first gain below 1 million since the labor market began to recover in May this year.

Meanwhile, various indicators of volatility - a measure of investor nervousness - rose sharply. The VIX index, which reflects options volatility on the S&P 500, rose by almost 9% in early US trading, while the V-DAX New - an indicator of options volatility on Frankfurt's DAX index - was up almost 7%.

"It seems that the knee-jerk reaction was first to sell USD a little instead, at least until markets can work out exactly how this potentially plays out. Stock futures are certainly going down at time of writing, however. Risk is off there," Rabobank strategists said in a note.

Spot gold was last up 0.1% on the day at $1,908 an ounce, having bounced off an earlier low of $1,889.90 an ounce as the news of Trump's positive test broke. The yield on the 10-year US Treasury fell 1 basis point on the day to 0.664%.

Oil, one of the most sensitive commodities to geopolitics and the economy, plunged by as much as 5% at one point. Brent crude futures were last down 4.0% at $39.29 a barrel, while WTI futures fell 4.1% to $37.11 a barrel. US crude oil futures were set for their biggest weekly fall in four months, having lost over 7.5%.

"News that Donald Trump has contracted Covid-19 adds to the bearish pressure," SEB chief commodities strategist Bjarne Schieldrop said. "It was always a big wild-card in this election whether one of the candidates would contract C-19 thus placing the candidate on the side-lines."

Highlighting the investor flight from risk was a drop in cryptocurrencies, with Bitcoin down by nearly 4% on the day, while Ethereum fell by 7.7%.

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