January 3, 2019 / 8:35 AM / 3 months ago

Daily Briefing: A bite of the Apple

LONDON (Reuters) - Apple’s first revenue warning in almost 12 years underlines fears for world growth, the hit to China’s economy from the trade war with the United States and the unwinding of many of the previously favoured technology stock bets.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China"

Apple’s guidance bomb on its fourth-quarter sales and holiday iPhone demand from China in particular came after the bell and a trading session in which Wall Street stocks struggled to get back in the black after an early plunge.

Apple shares fell more than 7 percent in after-hours trade and S&P500 futures are down more than 1 percent first thing on Thursday, with European stock futures also down 0.7 percent as tech bellwethers were expected to take a hit.

The shock rattled Asia stocks, with tech-heavy Taiwan and South Korea indices down almost 1 percent. Shanghai and Hong Kong losses were more modest as the fears of the Chinese economic slowdown shifted to expectations of further economic stimulus from both the government and the central bank.

The surprise also caused wild swings in the currency markets, with a dramatic surge in Japan’s yen by more than 3 percent at one point amid a flurry of technical triggers in a dash to what many people see as a safety play in times of global financial stress. Dollar/yen remains down 1.3 percent on the day, having hit a nine-month low under 105 during the holiday- thinned day with Japan’s markets closed.

With investors now nervous about the fourth-quarter U.S. corporate earnings season that begins this month – where consensus had already expected a near halving of annual profit growth to 15 percent compared to the third quarter – anxiety about a U.S. slowdown and the Federal Reserve’s response is remains high.

Ten-year Treasury yields dropped to their lowest in a year under 2.62 percent and the 2-10-year yield curve flattened again to just 15 basis points.

The dollar’s DXY index was down 0.25 percent, far less than its plunge against the yen, as worries about the euro zone slowdown and a plunge in 10-year German bund yields to their lowest since 2016 – less than 0.15 percent.  Emerging-market stocks fell for the second day in a row, although emerging- market currency indices recovered from a two-week low earlier in the session.

Turkey’s lira suffered some of the heftiest falls, weakening 0.8 percent as data showed inflation had eased for the second straight month and came in lower than expected at just over 20 percent in December. However, the yen’s surge earlier saw a parallel plunge in the lira of up to 10 percent against the Japanese currency at one point.

— A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own —

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