World stocks take a knock as companies feel virus fallout

London — 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% in Frankfurt and all Europe’s main markets fell after the iPhone maker warned that it is unlikely to meet the March quarter sales guidance it set just three weeks ago.

HSBC announced a huge restructuring that involves shedding $100bn of assets and slashing 35,000 jobs over three years. It also warned about the impact of the coronavirus (Covid-19) on its Asia business. The stock fell more than 2% 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 potential negative impact so far,” 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% to 0.5% declines came after Tokyo’s Nikkei dropped 1.4% as tech stocks globally reacted to Apple’s warning. China’s CSI 300 gave up 0.5% after gaining on Monday, encouraged by a central bank rate cut and government stimulus hopes.

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

Bonds were in demand, with the 10-year US treasuries yield falling four basis point to just above 1.5%. Safe-haven gold rose to its highest in two weeks and oil prices fell nearly 2% after five days of gains.

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

The euro was near a three-year low against 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 reports that US President Donald Trump’s administration is considering changing regulations to allow it to block shipments of chips to China’s Huawei from companies such as Taiwan’s Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker.

Tempted to sell

TSMC lost 2.9%. Samsung dropped 2.9% and Sony shed 2.5% 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, its National Health Commission said, and the World Health Organisation (WHO) 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