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Stocks slide on Apple’s virus warning, euro near three-year low

Gold climbs on risk-aversion bid.
Image: Shutterstock

Gold rose and global equity markets slid on Tuesday after Apple Inc said it was unlikely to meet its sales guidance because of the coronavirus outbreak in China, a warning highlighting the epidemic’s threat to global growth and corporate profits.

China reported its fewest new coronavirus infections since January and its lowest daily death toll in a week, but the World Health Organization said data suggesting the epidemic had slowed should be viewed with caution.

Chinese officials reported 1,886 new cases – the first time the daily figure has fallen below 2,000 since Jan. 30. The number of deaths, 98, fell below 100 for the first time since Feb. 11.

Apple said on Monday that manufacturing facilities in China that produce its iPhone and other electronics had begun to reopen, but were ramping up slower than expected.

The disruption in China will result in fewer iPhones available for sale around the world, making Apple one of the largest Western firms to be hurt by the outbreak.

Gold climbed more than 1% to a two-week high as investors sought safety in the wake of Apple’s warning. The price of Brent, the global crude benchmark, fell below $57 a barrel but rebounded on reduced supply from oil-rich Libya.

Forecasters, including the International Energy Agency (IEA), have cut 2020 oil demand estimates because of the virus.

Equity markets around the world fell, with MSCI’s all-country world index slipping 0.47%.

The pan-European STOXX 600 index lost 0.38% and emerging market stocks lost 1.11%.

HSBC Holdings PLC’s announcement that it would shed $100 billion in assets, shrink its investment bank and revamp its U.S. and European businesses in a drastic overhaul added to concerns about the impact of the coronavirus.

The UK-based bank, whose huge Asian operations are headquartered in Hong Kong, said the coronavirus epidemic had significantly impacted staff and customers. HSBC shares fell 6.35%, leading the FTSE 100 index to close down 0.69%.

On Wall Street, the Dow Jones Industrial Average fell 165.89 points, or 0.56%, to 29,232.19. The S&P 500 slid 9.87 points, or 0.29%, to 3,370.29 and the Nasdaq Composite rose 1.57 points, or 0.02%, to 9,732.74.

“We’re seeing some renewed weakness in the stock markets following the announcement by Apple,” said Saxo Bank analyst Ole Hansen. “It’s having a global impact on supply chains and shipments – this will have a negative impact on growth expectations.”

U.S. stocks pared losses late in the session and the Nasdaq closed essentially flat on speculation the hit to global supply chains by the coronavirus will be temporary.

“We view Apple’s sales warning as more catch-up than canary in the coal mine for both tech and regional markets,” UBS said in a research note.

Overnight in Asia, China’s CSI300 blue-chip stocks index lost 0.5% after gaining sharply on Monday, encouraged by a central bank rate cut and government stimulus hopes.

Japan’s Nikkei lost 1.40%.

The dollar rose to nearly a three-week high against the euro after Germany’s ZEW survey of economic sentiment showed slumping investor confidence in Europe’s largest economy.

The euro was down 0.39% to $1.0792, while the dollar index rose 0.43%. The Japanese yen strengthened 0.01% versus the greenback at 109.88 per dollar.

The ZEW research institute said in its monthly survey that investors’ mood deteriorated far more than expected in February on worries over the coronavirus’ effect on world trade.

The survey boosted expectations the German economy will lose more momentum in the first half as slumping exports keep manufacturers mired in a recession.

Safe-haven German 10-year bond yields fell to -0.43% at one point. Other 10-year bond yields in Europe fell similarly.

U.S. Treasury yields also fell. The benchmark 10-year note rose 8/32 in price, pushing its yield down to 1.5627%.

Oil prices slid over the expected impact of the coronavirus on crude demand and a lack of further action by the Organization of the Petroleum Exporting Countries and allies to support the market.

Crude rebounded on the collapse of Libyan oil output since Jan. 18 because of a blockade of ports and oilfields.

Brent crude rose 8 cents to settle at $56.93 a barrel, while U.S. West Texas Intermediate crude settled flat, or unchanged at $52.05 a barrel.

U.S. gold futures settled 1.1% higher at $1,603.60 an ounce.

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