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Stocks under pressure as Apple sounds warning on coronavirus

Published 02/18/2020, 01:43 AM
Updated 02/18/2020, 01:43 AM
Stocks under pressure as Apple sounds warning on coronavirus

Stocks under pressure as Apple sounds warning on coronavirus

By Hideyuki Sano

TOKYO (Reuters) - Asian shares fell and Wall Street was poised to retreat from record highs on Tuesday after Apple Inc (O:AAPL) said it would miss its March quarter revenue guidance as the coronavirus slowed production and weakened demand in China.

The warning from the most valuable U.S. company sobered investor optimism that stimulus from China and other countries would protect the global economy from the effects of the epidemic.

S&P500 e-mini futures (ESc1) slipped as much as 0.4% in Asian trade while Nasdaq futures fell 0.6%.

European stocks were expected to follow suit, with major European stock futures (STXEc1) (FDXc1) (FFIc1) trading 0.5-0.6% lower.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 1.0%, while Tokyo's Nikkei (N225) slid 1.4%, dragged down by tech stocks.

China's CSI300 (CSI300) blue chip shares gave up 0.5%, following a strong rally that was fueled by hopes Beijing would introduce more policy stimulus.

China's central bank cut the interest rate on its medium-term lending on Monday, paving the way for a likely reduction in the benchmark loan prime rate on Thursday.

However, sentiment took a subsequent knock as Apple said factories in China were re-opening but ramping up more slowly than expected, reinforcing signs of a broader hit to businesses from the epidemic.

"Apple is saying its recovery could be delayed, which could mean the impact of the virus may go beyond the current quarter," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities.

"If Apple shares were traded cheaply, that might not matter much. But when they are trading at a record high, investors will be surely tempted to sell."

Asian tech shares were also hit. Samsung Electronics (KS:005930) dropped 2.9%, Taiwan Semiconductor Manufacturing Co (TSMC) (TW:2330) lost 2.9% and Sony Corp (T:6758) shed 2.5%.

In China, the number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. The World Health Organization cautioned, however, that "every scenario is still on the table" in terms of the epidemic's evolution.

As China's authorities try to prevent the spread of the disease, the economy is paying a heavy price. Some cities remained in lockdown, streets are deserted, and travel bans and quarantine orders are in place around the country, preventing migrant workers from getting back to their jobs.

Many factories have yet to re-open, disrupting supply chains in China and beyond, as highlighted by Apple.

"Lifting travel restrictions is taking longer than expected. Initially we thought lockdowns would end in February and factory output would normalize in March. But that is looking increasingly difficult," said Ei Kaku, currency strategist at Nomura Securities.

Nomura downgraded its China first-quarter economic growth forecast to 3% from a year earlier, half the pace of the fourth quarter, from its previous forecast of 3.8%.

Nomura says there was a risk it could be even weaker.

Also hurting market sentiment was news that the Trump administration is considering changing U.S. regulations to allow it to block shipments of chips to Huawei Technologies from companies such as Taiwan's TSMC, the world's largest contract chipmaker.

Bonds were in demand, with the 10-year U.S. Treasuries yield falling 4.2 basis point to 1.546% (US10YT=RR) after a U.S. public holiday on Monday.

Safe-haven gold also rose 0.3% to its two-week high of $1,587.00 per ounce.

In the currency market, the yen ticked up 0.15% to 109.69 yen per dollar while the risk-sensitive Australian dollar lost 0.4% to $0.6686 . The yuan was steadier for now, trading at 6.9950 yuan per dollar .

The euro, grappling with worries about sluggish growth in the euro zone, edged down 0.1% to $1.0833 (EUR=), near its 33-month low of $1.0817 touched on Monday.

Oil prices slipped on fresh concerns over the economic impact of the coronavirus outbreak in China.

Brent crude (LCOc1) fell 0.6% to $57.30 a barrel, while U.S. West Texas Intermediate (WTI) crude (CLc1) slipped 0.3% to $51.90 a barrel.

London copper prices also retreated 0.3% to $5,797 a tonne, slipping from Monday's three-week high.

Latest comments

Appletards will likely buy on this news
Buying*
When the S&P hits 3100 then maybe you have the beginning of a bind area. The market has to come down considerably with this emergency situation going to affect every company
Apple runs to 500 on lowering estimates
Lol thatd be such an apple thing to do
Thanks Chris. Your comnentary is always knowledgeable and thorough.
The Trillion dollar repo loans from the Fed to the investment houses of Wall street started on Sep 18th and ran, on a once extended basis, to Feb 13th. The Fed said it would shrink the money supply more aggressively than previously anticipated, starting over night 13th to 14th of Feb end of ladt week. --- You can bet that retail investors who can not short the market end up holding the bag for Wall street's devious tactics of letting Billions of the repo loans fall through the cracks and never be repaid to the Fed, essentially laundering their debts through taking the money back from mom and pop who are invested long. --- Restarting Supply lines, not even kept idle but closed down, is an enormous challenge that is bottle-necked by those who are out of parts .. an activity that takes weeks or longer and likely cause more infections. -- Imagine the death of critical, non-replaceable managers in such supply lines ... All because a vain leader put vanity over COMMON SENSE AND ignored his
own Chinese CDC committee's recommendations on Jan 5th. Very sad. -- Make no mistake: if you re-elect a vain POTUS who fires people because his fragile ego can not handle criticism THEN YOU SET UP A POSSIBILITY FOR A SIMILARLY DISASTEROUS IGNORANCE OF THE FACTS in the future. --- People become collateral damage when democracy is overruled. China's Xi and Japan's Abe are guilty of Crimes against humanity by refusing medical care to people in medical distress. -- When will the victims initiate class-action lawsuits?
class action in China? U must be kidding! U dont rule China like u rule any other country, but it seems hard for those who have never lived here
Buying opportunity coming
Did no one see this coming? LoL
LoL
Why doesn't Apple diversify? Seems like too many eggs in one basket.
Rob, a couple weeks ago, that was the story line here. No virus issues for Apple because their sourcing was diversified. Who knows what to believe. My gut told me the virus problem would affect Apple negatively.
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