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Europe’s stock markets have dived more than 1% in early trade after news that US President Donald Trump and his wife have tested positive for Covid-19.

The region’s main bourses later clawed back some losses but were still languishing in negative territory, while many investors flocked to the safety of haven currencies.

The news compounded uncertainty on international trading floors, where investors were already in a pessimistic mood owing to US lawmakers’ failure to pass a new stimulus bill.

“Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!” Trump tweeted in the early hours.

The president had taken a test after his close White House aide Hope Hicks had tested positive earlier in the day, meaning he will now have to go into quarantine just weeks before one of the most crucial elections the country has ever had.

His doctor Scott Conley said the couple intended to stay at the White House “during their convalescence.”

“Rest assured I expect the president to continue carrying out his duties without disruption while recovering, and I will keep you updated on any future developments,” he added.

The White House cancelled a planned campaign rally in the crucial swing state of Florida on Friday, and 32 days before the 3 November vote against Democrat Joe Biden, it also looked certain Mr Trump would have to cancel a slew of other trips scheduled for this weekend and next.

The news sent Dow futures tumbling 1.9%, while the S&P 500 shed 1.9%. Safe-haven assets also rallied, with the Japanese yen – a go-to in times of turmoil and uncertainty – rose to 105 per dollar, from 105.60 earlier in the day.

The greenback climbed against higher-yielding currencies including the Australian dollar and South Korean won.

Japan’s Nikkei sank 0.7%, reversing earlier gains as traders resumed trading following yesterday’s market shutdown caused by a technical fault.

Sydney, Singapore and Bangkok were all down more than 1%, while Jakarta was also in the red.

However, Manila and Wellington both rose.

Axi analyst Stephen Innes said the announcement would likely increase Mr Biden’s already good chances of winning.

“The risk-off reaction to Trump’s positive Covid-19 test feels like the last of the Biden pricing is getting done,” he said in a note. “The quarantine will mean he misses three swing state rallies – with critical Florida among them.”

Sentiment had already been weak as hopes for a new US rescue package fade.

Democrats pushed their latest $2.2 trillion proposal through the House, where they hold a majority, but without any opposition support, there is no chance it will be agreed by the Republican-dominated Senate.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin held a series of talks yesterday to find a way through the deadlock but when asked whether a chance still remained for an agreement, Ms Pelosi replied: “I don’t know.”

OANDA analyst Jeffrey Halley added that “having built hopes higher steadily over the past few sessions that the US Republicans and Democrats were edging closer to a new fiscal stimulus package, a sense of deja vu has swept markets”.

He said that with Republicans offering about $600 billion less than Democrats, their difference was “less insurmountable than previous weeks. Sadly, it appears there is no sign that either side is prepared to cross the spread, or even meet in the middle”.

The need for a new deal was highlighted by news that Americans’ personal income had fallen more than expected in September, while several big-name firms including Walt Disney, American Airlines and United had cut tens of thousands of posts.

Oil prices dropped more than 2%, extending yesterday’s sharp drops on worries about the deadlock on Capitol Hill as well as concerns about demand after the US income data.

For crude, “a move higher is only possible if a fiscal agreement is reached”, said Axi’s Stephen Innes.

Markets in Hong Kong, Shanghai, Mumbai, Seoul and Taipei were all closed for holidays.

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