Apple falls, and stock markets feel the impact

LONDON: With global macroeconomic clouds looming and critical policy signals awaited from U.S. Federal Reserve Chair Jerome Powell this week, three individual stocks have grabbed the headlines and the mood.

Apple’s drop of more than 2% on Wall Street overnight after a broker downgrade to “sell” dragged the technology sector lower and rippled across tech stocks in Asia overnight too. The Apple retreat, after Rosenblatt Securities cited a “fundamental deterioration” over the next six to 12 months, came after Monday’s news of Deutsche Bank’s downsizing and staff cuts of 18,000 was met with a stock price drop of more than 5.4%.

The negative reaction to the latest restructuring of Germany’s biggest bank weighed on the battered European banking sector as stock and bond markets and credit-rating agencies doubted Deutsche’s moves would deliver a break-even next year or the promised return on equity over three years.

Shares in BASF were down 6.6% in early trade today after the German chemicals giant issued what one trader described as a “shocking” profit warning for the second quarter and full year, blaming a global economic slowdown and trade war between the United States and China. Shares in other chemical companies from Bayer to Lanxess and Wacker Chemie are also down in early trade. Autos could also suffer as BASF cited a downturn in automotive markets.

The equity market gloom saw the S&P500 drop almost 0.5% overnight and major Asia markets from Shanghai to Hong Kong and Seoul also fell. Japan’s Nikkei managed to stay in the black as a rising dollar pushed the yen back to its weakest since May.

Helped by scaled-down expectations of Fed easing later this month – where only a quarter-point cut is now priced into futures markets – the dollar’s DXY index rose to its highest in almost three weeks. Euro/dollar was probing $1.12 on the downside.

Ten-year U.S. Treasuries held firm above 2%. In Europe, the tech, banking and chemical sector woes saw stocks open about 0.3% lower. Italy’s 50-year government bond yield rose sharply following news that Rome will tap its ultra-long dated bond to take advantage of recent positive sentiment. Bond markets are also awaiting Greece’s return for a new refinancing after weekend elections there brought the centre-right New Democracy party back to power.

In emerging markets, currencies were mostly steady against the stronger dollar. Turkey’s lira stabilized after falling on Monday following the weekend’s sacking of the central bank chief Murat Cetinkaya. Sterling fell to its lowest since January amid deteriorating relations between Washington and London following leaked emails from the UK’s ambassador in DC that were highly critical of President’s Trump’s administration.

— A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own —