Wall Street opens lower as virus lingers, Apple suffers

Supply of Apple’s top-selling iPhone has been constricted by the outbreak of COVID-19. (AFP)
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Updated 19 February 2020

Wall Street opens lower as virus lingers, Apple suffers

  • The benchmark Dow Jones Industrial Average was down 0.4 percent to 29,288.51 points after about 30 minutes of trading
  • US tech giant Apple fueled the drop after announcing it expects a financial hit from the epidemic

NEW YORK: US stock markets opened lower Tuesday on the first day of trading from the long holiday weekend, after Apple warned its results would suffer from the viral outbreak in China.
Nearly 1,900 people have died and more than 72,000 others have been infected by the virus that broke out in China and has since spread to some 25 countries, causing airlines to cut flights to China and many businesses to shutter operations.
All three major US indices posted gains last week even as traders were vigilant throughout for more serious disruptions from the COVID-19 illness.
But on Tuesday morning, the benchmark Dow Jones Industrial Average was down 0.4 percent to 29,288.51 points after about 30 minutes of trading.
The tech-rich Nasdaq slipped 0.1 percent to 9,717.22 points, and the benchmark S&P 500 declined 0.2 percent to 3,372.03.
US tech giant Apple fueled the drop after announcing it expects a financial hit from the epidemic, causing revenue in the current quarter to come in below forecasts as supply of its top-selling iPhone is constricted.
Apple shares were down around 2.3 percent, but Michael Walkley, an analyst at Canaccord Genuity, did not believe the gloom would last.
“Despite the COVID-19’s impact on Chinese iPhone demand and supply chain disruptions near-term headwind, we believe Apple is performing strongly across all business lines,” he said in a note.

The Cupertino, California-based company said Monday that all of its iPhone manufacturing facilities are outside Hubei province, the epicenter of the outbreak, and all have been reopened. But the company said production is ramping up slowly.
“The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” Apple said in a statement.
The death toll from COVID-19, a disease caused by the new coronavirus, was 1,770 as of Monday.
Apple says demand for iPhones is also down in China because many of Apple’s 42 retail stores there are closed or operating with reduced hours. China is Apple’s third largest retail market for iPhones, after the US and Europe.
Outside China, Apple said iPhone demand has been strong and is in line with the company’s expectations.
On Jan. 28, Apple said it expected second quarter revenue between $63 billion and $67 billion. Apple’s second quarter ends March 30.
Apple says the situation is evolving and it will provide more information on its next earnings call in April.

Before trading commenced, Walmart announced weak fourth quarter earnings that were battered by unrest in Chile, a key market, as well as disappointing toy and clothing sales during the Christmas shopping season.
But the largest private employer in the United States did not — so far — forecast any bad news from the new coronavirus outbreak and its shares rose 0.5 percent when markets opened.


MENA economies face $116 billion hit from virus, oil slump: World Bank

Updated 13 min 9 sec ago

MENA economies face $116 billion hit from virus, oil slump: World Bank

  • Report warns of ‘uncertainty and fear’ amid calls for transparency to help region recover from twin economic shocks

DUBAI: The Middle East and North Africa (MENA) is facing a 3.7 percent contraction in gross domestic product (GDP) this year because of twin hits from the coronavirus pandemic and the collapse of demand for oil, the World Bank is forecasting.

The fall in GDP, which amounts to about $116 billion off the region’s economies, has accelerated from the 2.1 percent downturn the bank estimated just last month. In October 2019, the bank said Middle East economies would grow by 2.6 percent this year.

Ferid Belhaj, the bank’s vice president for the MENA region, said: “More than any other region, MENA is confronting two distinct but related shocks with the spread of the virus and the collapse in oil prices.”

The gloomy forecasts were contained in a new World Bank report entitled “How transparency can help MENA.”

The bank left open the option to change its forecasts again if deteriorating economic conditions warranted that.

FASTFACT

3.7 %

MENA is facing a 3.7 percent contraction in GDP this year.

“The costs of the current crisis are fluid, because it is difficult to predict how the global economy, national policies, and societies will react as the pandemic spreads,” the report said.

The bank said greater transparency, identified as a structural defect in the region, would help an economic recovery once the spread of the pandemic is halted.

“Across the region, transparency can help lead to growth with enhanced trust in government in the years and decades to come,” Belhaj said.

But the report left no doubt as to the severity of the situation in the region. “As the coronavirus pandemic sweeps across MENA, uncertainty and fear are gripping the streets. While citizens have turned to their governments to act, decades of lack of transparency has bred distrust and undermined State credibility,” it said.

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“People cannot be certain if daily reporting and updates are true. As someone aptly described the leadership response to the coronavirus: ‘When you lose people’s trust, even when you tell the truth, people won’t believe you’,” the report added.

“Since the beginning of the 21st century, growth of output per capita across MENA has been lower than what is typical for economies with the same levels of development. The authors argue that if the region had grown at the typical rate observed in the rest of the world, the region would be at least 20 percent richer than it is today,” the World Bank said.

“The lack of data and transparency in the region could be at least partly responsible for the region’s chronic low-growth syndrome. Indeed, as this report demonstrates, MENA stands out as the only region of the world to experience an absolute decline in their index of data transparency between 2005 and 2018,” it added.

“The pandemic is affecting MENA economies across four channels: The deterioration of public health; falling global demand for the region’s goods and services; declines in MENA’s domestic supply and demand because of social distancing measures; and, importantly, falling oil prices.”

Last week, the bank unveiled a $160 billion financial support package for developing countries.