Global stocks sink as Apple warns of coronavirus impact
Stocks broadly fell on Tuesday after Apple (APPL) warned that the impact of coronavirus would cause it to miss sales targets and constrain the supply of its flagship iPhone devices.
The company said on Monday that it did not expect to meet its second-quarter revenue guidance, pointing to supply chain issues and lower Chinese demand.
China is major market for Apple, and also forms a crucial part of its supply chain.
While China’s SSE Composite Index (^SSEC) was on the level, the Hang Seng (^HSI) fell by more than 1.5% in Hong Kong on Tuesday.
Japan’s Topix (1475.T) closed at near four-month lows, while the Nikkei (^N225) was down by 1.4%.
Stocks in Europe also declined. The pan-European STOXX 600 index (^STOXX) was down by more than 0.5%, reversing Monday’s gains.
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The FTSE 100 (^FTSE) fell by around 0.4% in London. Germany’s DAX (^GDAXI) was down by 0.6%, while France’s CAC 40 (^FCHI) fell by 0.5%.
“Apple rattled markets after warning it will miss revenue guidance this quarter due to the coronavirus outbreak,” said Neil Wilson, the chief markets analyst at Markets.com, on Tuesday.
“This is just enough reason for the market to come off a touch today in Europe and the US. US traders return from their three-day weekend so it’s back to normal but with an Apple-sized warning to welcome them back.”
Meanwhile, futures are pointing to a lower opening for US stocks.
S&P 500 futures (ES=F) are down by 0.4% and Dow Jones Industrial Average futures (YM=F) are down by 0.44%. Futures on the tech-heavy Nasdaq (NQ=F) are down by 0.8%.
“In warning in this way Apple has neatly summed up the knock to global growth stemming from both reduced output and consumption,” said Wilson.
“Clearly there is going to be a hit to both output and consumption in the world’s second largest economy and the world’s growth driver. This is bound to hit earnings of companies exposed — Apple being the bellwether.”
Most of Apple’s products are made in mainland China and the country accounts for around 16% of its overall revenues.
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Even then, the company’s revenue warning reflects the scale of the potential impact of coronavirus on the world economy, which analysts are still trying to estimate.
“This topic came up at every meeting [with clients],” said analysts on Credit Suisse’s investment strategy team.
“Investors do not know how to quantify the negative impact, and have been very wrong-footed by the market reaction,” they said.
“In the short term, we suspect that the hit to Chinese GDP could be significantly larger than consensus expects, but we believe this is a postponement, not a cancellation, of a global recovery and that the policy response should make up for most of the growth shortfall.”
