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03 January 2019
 |
| Financial Markets (The Total Investment & Insurance Solutions) |
Apple's shock warning that its Chinese sales are weakening ratcheted up
concerns about the world's second largest economy and weighed heavily on global
stock markets as well as the dollar on Thursday.
In a letter to shareholders on Wednesday, Apple CEO Tim Cook said iPhone
demand was waning in China and would hurt revenue for the October-December
quarter. In the letter, which was released after the markets closed, Cook said
Apple expects revenue of $84 billion for the quarter, almost a tenth lower than
the consensus expectation in financial markets.
Apple's warning, its first since 2002, deepened concerns about the
Chinese economy, which had been showing signs of stress amid a trade war with
the United States.
Shares in the company fell 7.6 percent to $146 in after-hours trading
and U.S. stock markets were poised for further big falls at the open. Dow
futures and the broader S&P 500 futures were down 1.4 percent.
Europe suffered similar declines, with Germany's DAX down 1.3 percent at
10,451 and France's CAC 40 declining 1.2 percent to 4,636. Britain's FTSE 100
was 0.4 percent lower at 6,709.
"For a while now there's been an adage in the markets that as long
as Apple was doing fine, everyone else would be OK," said Neil Wilson,
chief markets analyst at Markets.com. "Therefore, Apple's rare profit
warning is a red flag for market watchers. The question is to what extent this
is more Apple-specific, or more macro?"
Apple's warning couldn't have come at a worse time for stock market
investors given the wipeout in late-2018, when many global indexes posted their
worst performances in a decade amid concerns about the global economy and the
prospect of further U.S. interest rate hikes.
In times of market stress and volatility, there are some assets that
traditionally do well as investors perceive them as safer to hold.
The Japanese yen was one beneficiary of the stock market turmoil,
posting its biggest gains against the dollar in over a year and a half. At one
point, the yen was up 4.4 percent against the dollar, though market watchers
said that was partly due to the triggering of automated orders that led to a
"flash crash" during a holiday in Japan. The dollar later recovered
somewhat to trade 1.1 percent lower on the day at 107.63 yen. Gold also rose,
by 0.6 percent to $1,291 an ounce.
In Asia, tech-related stocks suffered most. South Korea's tech-heavy
Kospi ended 0.8 percent lower at 1,993.70 while the Shanghai Composite index
dropped less than 0.1 percent to 2,464.36. Hong Kong's Hang Seng gave up 0.3
percent at 25,064.36.
Some experts believe that the market volatility could eventually lead to
changes in the policies that are concerning investors. The Fed, for example,
could slow the pace of its interest rate increases if markets continue to drop.
And U.S. President Donald Trump could become more open to settling the trade
dispute with China.
"It is a well-known fact that Trump perceives the markets as a true
barometer of his presidency," said Piotr Matys, a strategist at Rabobank
International.The Total Investment
& Insurance Solutions
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