Stocks under pressure as Apple sounds warning on coronavirus

Stocks under pressure as Apple sounds warning on coronavirus

U.S. stock futures slipped from record levels on Tuesday after Apple Inc said it will not meet its revenue guidance for the March quarter as the coronavirus outbreak slowed production and weakened demand in China.

People wearing surgical masks walk past a screen showing Nikkei index outside a brokerage in Tokyo
FILE PHOTO: People wearing surgical masks walk past a screen showing Nikkei index outside a brokerage in Tokyo, Japan February 3, 2020. REUTERS/Kim Kyung-Hoon

TOKYO: Asian shares fell and Wall Street was poised to retreat from record highs on Tuesday after Apple Inc 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 slipped as much as 0.4per cent in Asian trade while Nasdaq futures fell 0.6per cent.

European stocks were expected to follow suit, with major European stock futures trading 0.5-0.6per cent lower.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.0per cent, while Tokyo's Nikkei slid 1.4per cent, dragged down by tech stocks.

China's CSI300 blue chip shares gave up 0.5per cent, 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 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 dropped 2.9per cent, Taiwan Semiconductor Manufacturing Co (TSMC) lost 2.9per cent and Sony Corp shed 2.5per cent.

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 3per cent from a year earlier, half the pace of the fourth quarter, from its previous forecast of 3.8per cent.

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 1.546per cent after a U.S. public holiday on Monday.

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

In the currency market, the yen ticked up 0.15per cent to 109.69 yen per dollar while the risk-sensitive Australian dollar lost 0.4per cent to US$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 0.1per cent to US$1.0833 , near its 33-month low of US$1.0817 touched on Monday.

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

Brent crude fell 0.6per cent to US$57.30 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped 0.3per cent to US$51.90 a barrel.

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

(Reporting by Hideyuki Sano; Additional reporting by Tomo Uetake; Editing by Shri Navaratnam and Sam Holmes)

Source: Reuters