Stocks fall after Apple warns on coronavirus impact

TOKYO: Asian shares fell and Wall Street retreated from record highs on Tuesday after Apple Inc (AAPL.O) said it will not meet its revenue guidance for the March quarter as the coronavirus outbreak slowed production and weakened demand in China.

The warning from the most valuable company in the United States sobered investor optimism that economic stimulus by Beijing and other countries would protect the global economy from the effects of the epidemic.

S&P500 e-mini futures ESc1 dipped as much as 0.3% in Asian trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.65% while Tokyo’s Nikkei .N225 slid 1.0%. Shanghai shares .SSEC dipped 0.2%, having gained in nine of the past 10 sessions largely on hopes for policy support by Beijing.

“Apple is saying its recovery could be delayed, which could mean the impact of the virus may go beyond the current quarter,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“If Apple shares were traded cheaply, that might not matter much. But when they are trading at a record high, investors will be surely tempted to sell.”

Asian tech shares were also hit. Samsung Electronics (005930.KS) dropped 2.1%, Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) lost 1.7% and Sony (7267.T) shed 2.6%.

As China’s authorities try to prevent the spread of the disease, the economy is paying a heavy price. Some cities remained in lockdown, streets are deserted, and travel bans and quarantine orders are in place around the country, preventing migrant workers from getting back to their jobs.

Many factories have yet to re-open, disrupting supply chains in China and beyond, as highlighted by Apple.

“Lifting travel restrictions is taking longer than expected. Initially we thought lockdowns would end in February and factory output would normalize in March. But that is looking increasingly difficult,” said Ei Kaku, currency strategist at Nomura Securities.

Nomura downgraded its China first-quarter economic growth forecast to 3%, half the pace of the fourth quarter, from its previous forecast of 3.8%, and added there was a risk it could be even weaker.

Also hurting market sentiment was news that the Trump administration is considering changing U.S. regulations to allow it to block shipments of chips to Huawei Technologies from companies such as Taiwan’s TSMC (2330.TW), the world’s largest contract chipmaker.