Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Alarm bells are ringing in the markets this morning after Apple warned it won’t hit key financial targets, due to the escalating coronavirus crisis.
Late last night, the tech giant admitted that it will fail to reach sales targets set just last month — the clearest sign yet that Covid-19 is having a serious impact on the global economy.
Apple warned that coronavirus is hurting both supplies, and demand.
Chinese factories are taking longer than expected to ramp up their iPhone production levels, having been closed for an extended period after the Lunar New Year fur to the virus. This means it will have fewer iPhones available for sale around the world.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated.
As a result, we do not expect to meet the revenue guidance we provided for the March quarter.”
That’s being compounded by retail closures across China. Given the health emergency, fewer Chinese consumers are venturing out to buy phones even if their local store is open. That’s a blow to Apple, as China provides a sixth of Apple’s revenue.
All of our stores in China and many of our partner stores have been closed.
Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can.”
Apple insists that the disruption is only temporary. But clearly the situation has deteriorated sharply in the last few weeks.
And if Apple are suffering, surely other companies — including its own suppliers — will be struggling too? On Monday, airline group Cathay Pacific issued its own warning, and we could easily see more today.
Asian investors have reacted swiftly, by hammering the sell button . The Chinese, Japanese and Hong Kong stock indices have all fallen, and European markets are likely to follow.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says Apple have put the markets on edge:
Even though Apple’s manufacturing partner facilities resumed activity last week, China hasn’t managed to get back to a normal rhythm just yet, and the latter could take a couple of more weeks, if not months.
The risk appetite remains fragile and gains in equity markets remain vulnerable to coronavirus related news.
Also coming up today
Banking giant HSBC has reported a 33% plunge in profits this morning, and shocked staff by suggesting it will cut 35,000 jobs as part of a radical overhaul (more on that shortly).
Speaking of jobs…. the latest UK unemployment report is due this morning. It’s likely to show that wage growth slowed in the final quarter of 2019, as nervous companies held back from pay rises.
But the jobless rate could remain at its lowest level since the mid 1970s.
- 9.30am: UK unemployment figures; jobless rate expected to stick at 3.8%
- 10am: ZEW survey of eurozone economic confidence