TOKYO (Reuters) – Asian shares fell and Wall Street retreated from record highs on Tuesday after Apple Inc (AAPL.O) said it will not meet its revenue guidance for the March quarter as the coronavirus outbreak slowed production and weakened demand in China.
The warning from the most valuable company in the United States sobered investor optimism that economic stimulus by Beijing and other countries would protect the global economy from the effects of the epidemic.
S&P500 e-mini futures ESc1 dipped as much as 0.3% in Asian trade.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.65% while Tokyo’s Nikkei .N225 slid 1.0%. Shanghai shares .SSEC dipped 0.2%, having gained in nine of the past 10 sessions largely on hopes for policy support by Beijing.
China’s central bank cut the interest rate on its medium-term lending on Monday, which is expected to pave the way for a reduction in the benchmark loan prime rate on Thursday.
But sentiment was shaken when Apple told investors its manufacturing facilities in China have begun to re-open but are ramping up more slowly than expected, reinforcing signs of a broader hit to businesses from the epidemic.
“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.”
In China, the number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. The World Health Organization cautioned on Monday, however, that “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 remained in lockdown, streets are deserted, and travel bans and quarantine orders are in place around the country, 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.
“Lifting travel restrictions is taking longer than expected. Initially we thought lockdowns would end in February and factory output would normalize in March. But that is looking increasingly difficult,” said Ei Kaku, currency strategist at Nomura Securities.
Nomura downgraded its China first-quarter economic growth forecast to 3%, half the pace of the fourth quarter, from its previous forecast of 3.8%, and added there was a risk it could be even weaker.
Also hurting market sentiment was news that the Trump administration is considering changing U.S. regulations to allow it to block shipments of chips to Huawei Technologies from companies such as Taiwan’s TSMC (2330.TW), the world’s largest contract chipmaker.
Bonds were in demand, with the 10-year U.S. Treasuries yield falling 1.0 basis point to 1.578% US10YT=RR after a U.S. market holiday on Monday.
Safe-haven gold XAU= also rose 0.18% to $1,584.80 per ounce.
In the currency market, the yen ticked up 0.1% to 109.75 yen per dollar JPY= while the risk-sensitive Australian dollar lost 0.4% to $0.6707 AUD=D4. The yuan was steadier for now, trading at 6.9866 yuan per dollar CNY=CFXS.
The euro, grappling with worries about sluggish growth in the euro zone, edged down 0.1% to $1.0836 EUR=, near its 33-month low of $1.0817 touched on Monday.
Oil prices also dipped.
West Texas Intermediate (WTI) crude CLc1 rose as high as $52.41 per barrel, before giving up gains to be $51.96 per barrel, down slightly on the day.
Reporting by Hideyuki Sano; Editing by Richard Pullin & Shri Navaratnam