Premarket: Apple warning hits stocks, euro near three-year low – The Globe and Mail

World stocks markets were knocked off record highs on Tuesday as two of the world’s mega companies reported damage from the coronavirus outbreak.

Apple’s stock fell almost 6 per cent in Frankfurt and all Europe’s main markets fell after the iPhone maker warned it was unlikely to meet the March quarter sales guidance it had set just three weeks ago.

HSBC announced a massive restructuring that involved shedding US$100-billion of assets and slashing 35,000 jobs over three years. It also warned about the impact of the coronavirus on its Asia business. The stock fell more than 2 per cent in Hong Kong trade.

“We have been pointing out that the market reaction in past weeks was excessively constructive and this could be a wake-up call to all investors that ignored so far potential negative impact,” analysts at UniCredit said.

The warning from Apple sobered investors who had hoped stimulus from China and other countries would protect the global economy from the effects of the epidemic.

Europe’s 0.4 per cent to 0.5 per cent declines came after Tokyo’s Nikkei dropped 1.4 per cent and the Hang Seng slid 1.5 per cent as tech stocks globally reacted to Apple’s warning. China’s CSI300 gave up 0.5 per cent after gaining on Monday, encouraged by a central bank rate cut and government stimulus hopes.

S&P 500 e-mini futures slipped 0.4 per cent and Nasdaq futures fell 0.6 per cent.

Bonds were in demand, with the 10-year U.S. Treasuries yield falling 4 basis point to just above 1.5 per cent. Safe-haven gold rose to its highest in two weeks and oil prices fell nearly 2 per cent after five days of gains.

The yen rose 0.15 per cent to 109.69 yen per dollar while the risk- and China-sensitive Australian dollar lost 0.4 per cent to $0.6686. The yuan was steadier, trading at 6.9950 per dollar.

The euro was near a three-year low versus the dollar at $1.0830, before Germany’s ZEW survey, which is expected to fuel growing pessimism about Europe’s largest economy.

Also hurting market sentiment were a reports that U.S. President Donald Trump’s administration was considering changing regulations to allow it to block shipments of chips to China’s Huawei from companies such as Taiwan’s Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker.

TSMC lost 2.9 per cent. Samsung Electronics dropped 2.9 per cent and Sony Corp shed 2.5 per cent after the Apple coronavirus warning.

The number of new coronavirus cases in mainland China fell below 2,000 for the first time since January, but the virus remains far from contained. The death toll in China has climbed to 1,868, the National Health Commission said, and the World Health Organization said “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 remain locked down, streets are deserted, and travel bans and quarantine orders are 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.

“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.”

– Reuters

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