Apple bombshell sparks currency ‘flash crash’ as investors abandon tech stocks

Flagging demand for iPhones in China has heightened investor fears surrounding Apple’s most profitable product amid global economic weakness and a trans-Pacific tariff dispute. (AP)
Updated 04 January 2019
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Apple bombshell sparks currency ‘flash crash’ as investors abandon tech stocks

  • It’s Apple’s first downgrade in nearly 12 years, blaming weaker iPhone sales in China
  • “No one wants to take any risk because none of the uncertainties we are facing have been lifted, whether it’s Brexit, this trade war, or growth”

LONDON: Apple’s rare warning on revenue rocked financial markets on Thursday, as investors sought safety in bonds and less risky assets amid renewed concerns about slowing global economic and corporate growth.

Asian and European shares fell sharply, led by a sell-off in technology stocks, after Apple cut its revenue forecast, its first downgrade in nearly 12 years, blaming weaker iPhone sales in China.

The news also jolted currency markets and German government bond yields held close to their lowest in over two years.

“For the moment, investors have reacted by going into non-risky assets,” said Philippe Waechter, chief economist at Ostrum Asset Management, in Paris.

“No one wants to take any risk because none of the uncertainties we are facing have been lifted, whether it’s Brexit, this trade war, or growth.

“Investors are putting their heads in the sand and waiting,” Waechter said.

Apples shares fell dramatically in after-hours trade and those listed in Frankfurt were down by 8.6 percent in early European deals.

The news sparked a “flash crash” in holiday-thinned currency markets as growing concerns about the health of the global economy, particularly in China, sent investors scurrying into the haven of the Japanese yen, which was poised for its biggest daily rise in 20 months.

Apple’s warning came after data earlier this week showed a deceleration in factory activity in China and the euro zone, indicating the ongoing trade dispute between the US and China was taking a toll on global manufacturing.

Major European bourses were firmly in negative territory by midmorning — Frankfurt’s DAX, with its exposure to Chinese trade and tech-heavy constituents, was the biggest faller and down as much as 1.2 percent, while the CAC40 in Paris dropped by 1.1 percent and London eased by 0.4 percent.

Chipmakers who supply parts to Apple were the worst hit, sending technology stocks to their lowest since February 2017. Overnight, shares in China and Hong Kong see-sawed between gains and losses as investors braced for Beijing to roll out fresh support measures for the cooling Chinese economy.

“Chinese authorities have the luxury of having control not just of the fiscal parts of the government tool case, but also the monetary parts ... and I suspect the Chinese authorities will make use of that,” said Jim McCafferty, head of equity research, Asia ex-Japan, at Nomura.

China’s central bank said late on Wednesday it was adjusting policy to benefit more small firms that are having trouble obtaining financing, in its latest move to ease strains on the private sector.

While more fiscal and monetary policy support had been expected in coming months on top of modest measures last year, some analysts wonder if more forceful stimulus will be needed.

Currency markets saw a wild spike in volatility in early Asian trade, with the yen moving sharply higher against the US dollar, triggering stop-loss sales of US and Australian dollars.

The dollar was last 1 percent weaker against the yen at 107.77, having earlier fallen as low as 104.96, its lowest level since March 2018. The Australian dollar at one point hit levels against the Japanese yen not seen since 2011.


US trade negotiators to visit China for fresh round of talks

Updated 21 March 2019
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US trade negotiators to visit China for fresh round of talks

  • Washington and Beijing are battling over the final shape of a trade deal
  • American officials are demanding profound changes to Chinese industrial policy

BEIJING: US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will visit China on March 28-29 for a fresh round of talks aimed at resolving the bruising trade war, the Chinese commerce ministry said Thursday.
After their visit, Chinese Vice Premier Liu He will head to the United States in April to continue the negotiations, ministry spokesman Gao Feng said at a press briefing.
Washington and Beijing are battling over the final shape of a trade deal, with American officials demanding profound changes to Chinese industrial policy.
President Donald Trump warned Wednesday that US tariffs on Chinese imports could remain in place for a “substantial period,” dampening hopes that an agreement would see them lifted soon.
Over the last eight months, the United States and China have slapped tariffs on more than $360 billion in two-way goods trade, weighing on the manufacturing sectors in both countries.
On Friday, China’s rubber-stamp parliament approved a foreign investment law to strengthen protections for intellectual property — a central US grievance — but critics said the bill was rammed through without sufficient time for input from businesses.