Bad Apple results are rotten news for markets
Apple's first sales warning in nearly 12 years sent European shares sliding yesterday, with the tech sector particularly badly bruised as chipmakers that supply the iPhone maker fell sharply.
The pan-European STOXX 600 fell 0.9pc as weak US manufacturing data added to nerves over slowing global growth. Apple's own shares, listed in the US and Frankfurt, tumbled almost 10pc.
Apple's warning on revenue rocked financial markets, as investors shunned equities and sought safety in bonds and less risky assets amid renewed concerns about slowing global economic growth and damage from the US-China trade war. Technology stocks led a sell-off across Asian, European and US shares after Apple, which is led by CEO Tim Cook, 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." The alert renewed worries about corporate earnings just weeks before results season kicks off in the United States and stirred worries that it signals broader malaise in the global economy, said Peter Rutter, head of global equities at Royal London Asset Management.
"The equity market in the past three or four months has begun to bake in some form of economic slowdown and a reduction in corporate earnings expectations and there's a wrestling match between waiting for that to come through," he said.
Analysts on average expect S&P 500 companies to increase their earnings per share by nearly 7pc this year, down from a forecast of 10pc at the start of October and far below their expectations of 24pc EPS growth for 2018, according to Refinitiv's IBES.
The news sparked a 'flash crash' in holiday-thinned currency markets as growing concerns about the health of the global economy sent investors into the safe-haven Japanese yen, which was poised for its biggest rise in 20 months.