Japanese investors barely had the chance to respond to the bombshell that President Donald Trump has contracted Covid-19, but they did respond.
That's partly because word of that development broke late in the trading day, around 2 p.m. Tokyo time. It's also because it was touch and go whether the Tokyo exchange would work at all.
The trading system completely failed on Thursday, resulting in a full-day outage. No backup kicked in, either.
There was mild selling in Asia after Trump's disclosure, but many markets by coincidence are closed for holidays on Friday, so other investors will need to wait until Monday. There was a knee-jerk buying of safe-haven currencies during the Asian day, with the U.S. dollar and Japanese yen strengthening. S&P 500 futures are down about 1.0% as I write.
Tokyo's stock outage is shocking. It was the first failure since the market moved to electronic trading in 1999. Tech support couldn't get things up and running all day.
Together with last week's revelation that two Japanese trust banks had not counted millions of investor mail-in ballots from around one-third of all the public companies in Japan over more than two decades, and you get a picture of how antiquated and in need of modernization both the figurative and literal operating environment is for investors in Japan.
The Topix index of all major stocks in Tokyo shed 1.2% immediately after word came of the U.S. president testing positive for the coronavirus. The Tokyo market did recover slightly before the close but fell 1.0% for the day.
European shares also fell upon open, with London's FTSE 100 index down 0.7% while the STOXX 600 in Germany dropped 0.5%. Both markets then began to recover.
It is possible that Trump's contraction of the coronavirus will affect stocks short term, depending on how sick he gets. After British Prime Minister Boris Johnson announced on March 27 that he had caught the virus, London stocks fell 6.9% when he entered the hospital in the next week. They recovered when Johnson returned to work on April 27.
Johnson, now 56, struggled to fight the virus and ended up breathing with oxygen support. British Foreign Secretary Dominic Raab took over the running of the government.
Johnson spent three nights in intensive care, with extra oxygen, although members of his team were at pains to note he was never put on a ventilator. But even in his recovery at the prime minister's country residence, he seemed shaky and infirm. Johnson, who is overweight and went on a subsequent fitness kick, said it "could have gone either way."
The illness of Trump and wife Melania is undoubtedly casting uncertainty over the leadership of the government of the world's largest economy. And you know what they say about markets and uncertainty. How this affects the U.S. election next month is anyone's guess. Johnson's popularity saw a short-term boost of sympathy.
But Trump, 74, has promoted "miracle" cures for the virus and mocked rivals for heeding public health warnings, which he often ignored. Trump generally has refused to wear a mask, so investors may take his sickness as a sign of irresponsibility. Trump, who is technically obese for his height and in a dangerous virus demographic in terms of age, has also done his level best to depict Democratic rival Joe Biden, who is three years older, as doddery and senile.
Many stock markets are closed for holidays on Friday in Asia. Traders as a result couldn't react in mainland China, Hong Kong, India, South Korea and Taiwan today.
It's the Mid-Autumn Festival long weekend here in Hong Kong, in greater China and in South Korea, the equivalent of Thanksgiving. So the markets in Shanghai and Shenzhen won't reopen until next Friday, October 9. The other exchanges will reopen on Monday.
Trading in Tokyo saw volumes about 20% higher than normal on Friday. All of Thursday's orders were declared invalid, so trading began at Wednesday's levels. The Topix moved 0.8% higher at the start.
There will be an inquest into the hardware problem that caused the market's infrastructure to fail. Oct. 1 marks the start of the second half of the Japanese fiscal year.
Tokyo switched to all-electronic trading in 1999. Thursday's blackout was caused by a hardware failure of the Arrowhead trading system used at the Tokyo Stock Exchange, the exchange explained.
Japan's Financial Services Authority stock watchdog has demanded a full report. But the Tokyo Stock Exchange says there was no cyberterrorism or cybercrime factor, which has reassured market participants.
Fujitsu FJTSY, which developed Arrowhead, saw its shares fall 2.8% in Tokyo trade on Friday. Japan Exchange Group JPXGY, which runs the Tokyo market, fell 1.9%.
Foreign investors account for around two-thirds of average daily trading volume in Tokyo. So this outage deals the exchange a black eye at a time when Tokyo is attempting to win business from politically troubled Hong Kong as an Asian, rather than purely Japanese, financial center.
Fujitsu introduced Arrowhead in 2010, generally cutting down on glitches in trade, and gave it an upgrade in November 2019 to help it process orders down to 0.2 milliseconds. The Tokyo exchange said a disc-device failure caused abnormalities in the distribution of market information and the monitoring of markets. But it is still digging deeper into the root cause.