Apple shares drop after coronavirus warning; Jaguar Land Rover faces parts shortage – business live
Rolling coverage of the latest economic and financial news
- Latest: Apple shares drop 2.8% at the open
- German investor confidence hit by virus fears
- Apple's shares slide 5% in Frankfurt
- Tech stocks hit by revenue warning
- Apple: coronavirus will hurt iPhone sales
6.24pm GMT
Finally, here's our latest story on the coronavirus's growing impact on the global economy:
Related: UK car factories running out of parts due to coronavirus, warns Jaguar
5.10pm GMT
In New York, shares are drifting lower too following Apple's warning that it won't meet its quarterly revenue target on account of the coronavirus crisis in China.
The Dow Jones industrial average is down 0.86% or 252 points at 29,145.
The warning from the tech giant spooked traders as it is probably a sign of what is to come from other companies that have exposure to China - which is a very long list.
The health crisis is causing major disruption to businesses in the second-largest economy in the world, so traders are ducking out of equities.
5.02pm GMT
Britain's FTSE 100 index of top shares has closed 51 points lower at 7,382, a drop of 0.7%.
HSBC led the fallers, down 6.5% after posting lower profits and announcing sweeping job cuts. Miners also had a bad day.
3.46pm GMT
Brazil's economy is also going to hit by the coronavirus crisis, economists fear, due to its export links to China:
Citi cuts Brazil 2020 GDP growth forecast to 2.0% from 2.2% on coronavirus fallout. Sees 2.0% growth for each year out to 2024.
3.30pm GMT
The boss of Tata Motors, JLR's parent company, also warned that parts from China are in short supply.
Guenter Butschek told reporters:
"We are safe for the month of February and for a good part of March.
Are we fully covered at this point of time for the full month of March? Unfortunately...not."
3.05pm GMT
Don't panic.... but carmaker Jaguar Land Rover's UK factories could run out of parts from China in a couple of weeks.
According to Reuters, JLR chief executive Ralf Speth has said that Jaguar Land Rover has enough parts from China to maintain its British production for the next two weeks but not beyond that at the moment.
2.50pm GMT
The Financial Times have a great story about Apple's problems in China, which explains why production levels are much lower than expected.
They've learned that Foxconn is struggling to get enough workers onto the iPhone assembly line at its huge factory complex at Zhengzhou, in China's Henan province.
The rooms, which usually pack in eight workers, had quickly filled, causing Foxconn to halt the return of additional staff, explained a Zhengzhou-based factory recruiter, who asked not to be named.
"They don't have enough room," the recruiter said, adding that workers could now sign up and wait for quarantine availability. "There's no one snoring. There's no one bothering you. The internet is finally fast," said one worker of the comfortable conditions in quarantine.
2.38pm GMT
This 2.8% decline knocks around $40bn off Apple's valuation.
That sounds like a lot, but it means the tech giant is still worth $1.38 trillion, down from $1.42trn.
2.36pm GMT
Newsflash: Shares in Apple have fallen by 2.8% at the start of trading on Wall Street.
New York traders are showing concern about last night's revenue warning. But this fall isn't as sharp as feared this morning, when Apple was down 5% in Frankfurt.
2.28pm GMT
The coronavirus crisis could drag Italy's economy into a recession this year, fears Capital Economics.
Jack Allen-Reynolds, Senior Europe Economist, told clients that:
After Italy's economy shrank at the end of last year, it looks set to continue to struggle in 2020. In fact, there is a clear risk that it falls back into recession for the fourth time since 2008.
2.05pm GMT
Last night's warning from Apple is a wake-up call for investors, writes our economics editor Larry Elliott:
China is a big market for Apple - accounting for around one-sixth of its global revenues - and is the source of most of its products. The coronavirus represents both a demand and a supply shock to the company.
Apple's statement to investors represented something of a reality check to the financial markets, which have been blithely assuming that the coronavirus would represent only a short-lived hit to China and to the wider global economy. To be sure, Apple says that production will return to normal but stresses that the process is taking longer than expected. This is far more serious than the outbreak of Sars (severe acute respiratory syndrome), and its timing could hardly have been worse....
Related: Apple is the best bellwether for the coronavirus fallout
1.50pm GMT
Just in. Factories in the New York state have reported their biggest increase in new orders in a year.
Increasingly clear that global economic momentum was recovering pretty strongly pre coronavirus - important context for bullish equity markets
Everyone now waiting to see the coronavirus impact in flash PMIs later this week https://t.co/M7GylCOS5A
1.30pm GMT
"Of the 364 companies that have held Q4 earnings calls, 138 cited the term #coronavirus during the call, and about 25% of those included some impact from the coronavirus or modified guidance due to the virus, according to @FactSet." - @DionRabouin @axios
1.09pm GMT
US tech stocks could be in for a rough day, thanks to Apple.
Chipmakers Qualcomm and Broadcom, who supply technology for the iPhone, are both down around 2% in pre-market trading. Apple's now off 2.5%.
US Opening Calls:#DOW 29235 -0.79%#SPX 3366 -0.67%#NASDAQ 9560 -1.03%#RUSSELL 1680 -0.52%#FANG 3756 -0.01%#IGOpeningCall
1.01pm GMT
12.50pm GMT
Swiss bank UBS have created some neat charts showing how economic activity in China has (understandably) flatlined in recent weeks.
As you can see, coal consumption, property sales and traffic congestion are all much weaker than usual:
UBS's China activity tracker sending very similar signals to GS from Friday. pic.twitter.com/oi2pLRbJtA
12.40pm GMT
HSBC has revealed it could be forced to take $600m in additional provisions against loan losses if the Coronavirus outbreak isn't tackled before the middle of 2020.
Reuters has the details:
Chief financial officer Ewan Stevenson said on Tuesday HSBC has modelled several scenarios for the impact of the virus on its business, and in the more extreme of those in which it carries on, the lender would have to assume bad loans rising to that amount.
"There will be revenue impacts which will become progressively more acute if the coronavirus was to continue beyond the next month to six weeks," Stevenson told analysts on a conference call.
Related: HSBC to cut 35,000 jobs worldwide as profits plunge
12.36pm GMT
This is a remarkable slide from the American Chamber of Commerce in Shanghai survey on how businesses are struggling to get back up to speed in China:
Fully 61% of firms have no contingency plans, other than to wait for their China factories to re-open. https://t.co/gBH2JUg9xc pic.twitter.com/XciC3Xlk3x
12.02pm GMT
Back in London, the FTSE 100 has touched a fresh two-week low.
The blue-chip index is down 1.05%, or 78 points, at 7,354. There's a clear coronavirus impact, with mining companies among the top fallers.
11.51am GMT
Callum D'Ath, senior investment manager at Brewin Dolphin, suggests Apple's management may be criticised for putting so much reliance on Chinese manufacturing.
He writes:
This is Apple's second sales warning in 12 months where the company has blamed China-related issues. Previously it was the US/China 'trade war' and now it is the Coronavirus. As Apple supposedly has one of the best supply-chain systems in the world coupled with a very big physical presence in China, investors may question the quality of management going forward.
"Looking ahead for Apple, this is probably a transitory impact to numbers as global supply-chain issues will dissipate. In addition, while this is clearly a hardware issue, the jury is still out on whether Apple is a hardware company or successful in transitioning to becoming a high-quality consumer staple company with a growing software business."
Apple (US) opens sharply lower: $310.88 -4.33%
Online trading available from 0900 (GMT): https://t.co/sJybTvnyWV $AAPL#Apple pic.twitter.com/Ug431UUU8A
11.44am GMT
China's president, Xi Jinping, has insisted that the country's economy won't be derailed by the coronavirus crisis, and can still hits its growth targets.
Reuters has the details:
China can meet its economic growth target in 2020 despite the impact of the coronavirus outbreak, state television quoted President Xi Jinping as saying on Tuesday.
Xi said the economy remained resilient as efforts to control the outbreak reached a critical stage.
*XI SAYS CORONAVIRUS IMPACT ON #CHINA ECONOMY IS TEMPORARY: CCTV
*CHINA TO CUT SOCIAL INSURANCE FEES FOR FIRMS AMID VIRUS: CCTV
*CHINA STATE COUNCIL EMPHASIZES EMPLOYMENT: CCTV
11.24am GMT
The coronavirus is the third-biggest 'tail risk' keeping fund managers awake at night, according to Bank of America's monthly survey.
The top worry -- the US presidential election.
2020 US presidential election (26%), bond bubble pops (22%), Coronavirus (21%) the 3 big "tail risk" for markets from BofA's monthly Global Fund Manager Survey. Trade war no longer Top 3 risk for investors. Drop to #4 and the lowest since the issue was first asked in March 2018. pic.twitter.com/ARECirdDFn
11.12am GMT
Just in: US supermarket titan Walmart has missed sales and profit expectations, and issued weaker-than-expected earnings forecasts.
Walmart made $1.38 per share in adjusted earnings in the last quarter, shy of forecasts of $1.44. Sales rose by 1.9%, missing forecasts of 2.4%.
$WMT |
- Walmart 4Q Adj. Eps $1.38, Est. $1.44
- Walmart Sees Year EPS $5.00-$5.15, Est. $5.22
- Walmart-Only 4Q U.S. Comp Sales Ex-Fuel Up 1.9%, Est. Up 2.4%
Walmart's 2021 earnings forecast misses estimates, even without accounting for the effects of coronavirus' spread. This may be more concerning for markets than even Apple's announcement, since it calls into question the resilience of the US consumer, which has powered the economy
10.56am GMT
Neil Wilson of Markets.com reckons investors will soon shake off their worries about Apple, even though its shares are having a bad day.
He writes:
Apple says it won't hit its Q2 revenue guidance of $63-67bn due to the Covid-19 outbreak in China. In warning in this way Apple has neatly summed up the knock to global growth stemming from both reduced output and consumption.
Firstly, how anyone is surprised by this is beyond me. Clearly there is going to be a hit to both output and consumption in the world's second largest economy and the world's growth driver. This is bound to hit earnings of companies exposed - Apple being the bellwether.
10.54am GMT
Apple's share are down over 3% in pre-market trading in New York, as early-bird traders prepare to head to Wall Street.
This chart from Bloomberg TV shows why the turmoil in China is bad for Apple's revenues - meaning it will miss sales targets this quarter.
10.44am GMT
Chanel has cancelled a fashion show scheduled for May in Beijing, due to coronavirus angst - another sign of the economic cost of the crisis.
"Considering the current situation and following the guidance of Chinese authorities, Chanel has decided to postpone its project of a replica of the Paris - 31 Rue Cambon 2019/20 Mi(C)tiers d'art collection in May in Beijing to a later and more appropriate moment."
The "31 Rue Cambon" show was first held in Paris in December, inspired by the studio and workshop of founder Coco Chanel. The decor was created by the film director Sofia Coppola.
10.34am GMT
CNBC's Julianna Tatelbaum says the slump in German investor confidence is much worse than expected -- as sign that the coronavirus is causing real alarm:
BREAKING: #ZEW survey of German economic sentiment sharply MISSES expectations for February as #coronavirus concerns take toll on confidence
Current Conditions @ -15.7 (poll -10.3)
Sentiment @ 8.7 (poll 21.5)
...Is bad data actually good though for fiscal spending prospects?
#Germany: Investor confidence deteriorated markedly in February with the ZEW index dropping to 8.7 from 26.7 in January amid fears over the impact of the #coronavirus on trade. #GreenShootsTurningIntoBrownWeeds? pic.twitter.com/UNUmgUnxkO
February #ZEW shows the expected setback, but #coronavirus hit so far muted, as #Germany and #euroarea remain in upswing quadrant and expectations-current condition spread still in positive territory. pic.twitter.com/QPQ4E5WYBD
10.28am GMT
ZEW president Achim Wambach says:
"The feared negative effects of the coronavirus epidemic in China on world trade have been causing a considerable decline of the indicator of economic sentiment for Germany.
Expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply."
10.13am GMT
NEWSFLASH: German investor confidence has taken a nosedive, hit by coronavirus turmoil and recession fears.
The ZEW Institute's measure of German economic sentiment has tumbled to just 8.7, down from January's 26.7 (which was a four-year high).
#Germany's #ZEW index falls to 8.7, bigger decline than expected. pic.twitter.com/4zolrAykoT
First sentiment indicator gauging the impact from Corona on the German economy does not bode well. Sharp drop in ZEW index in February
10.04am GMT
Back in the markets, Apple's shares are still under pressure in Frankfurt.
The tech giant is down around 3.66%, so it's clawed back a BIT of its early selloff.
Apple faller 5 procent i Frankfurt efter coronavarningen. pic.twitter.com/aX3rcSgKug
9.55am GMT
Newsflash: Britain's new chancellor, Rishi Sunak, has squashed fears that the budget could be delayed following the shock departure of his predecessor, Sajid Javid.
It's still on for 11 March, he just tweeted:
Cracking on with preparations for my first Budget on March 11. It will deliver on the promises we made to the British people - levelling up and unleashing the country's potential. pic.twitter.com/5msCVfJWN8
9.52am GMT
Here's some reaction to today's jobs report from the Resolution Foundation think tank:
Ending the decade on a high - the UK's employment in the three months to December 2019 reached a new record high of 76.5 per cent. More to follow.... pic.twitter.com/6wOV4rNLBv
Ending the decade on a high (part II) - real average weekly earnings (excluding bonuses) have finally surpassed their pre-crisis peak - finally ending the UK's unprecedented 12-year pay downturn pic.twitter.com/sNMvEbX74b
Important context to the welcome return of record pay levels today. Absent the UK's unprecedented 12-year pay downturn, real average weekly earnings would be 141 a week higher. That's a lot of lost ground - a huge living standards loss. pic.twitter.com/9wRQKQHLsW
UK employment rate hits yet *another* record of 76.5%.
But as employment rises against the backdrop of stagnating GDP, weak productivity is a bad sign for future wage growth.
And we do see wage growth continuing to slow to 3.2% year on year pic.twitter.com/OmalpS3ZCk
9.43am GMT
Good news! Pay in Britain has finally hit its pre-crisis levels, once you adjust for inflation and strip out bonuses.
That's according to today's unemployment report, which says:
Real regular pay increased by 1.8% to 474 between December 2018 and December 2019.
This was the first time that real regular pay exceeded the pre-downturn peak of 473 recorded in March 2008. However, the annual rate of growth of both total and regular pay slowed down in recent months.
9.40am GMT
NEWSFLASH: Britain's employment rate has hit a new record high, but wage growth has slowed.
The Office for National Statistics has reported that the UK employment rate rose to 76.5% in the October-December quarter-- up from 76.1% in the previous quarter.
Lower nominal wage growth has not hit UK consumers, as CPI inflation has fallen just as much
Decent real wage growth means there is no reason to believe UK private consumption should stop growing pic.twitter.com/ibkMEpYs9m
9.27am GMT
Most major European stock markets are in the red today, as investors digest the implications of Apple's revenue warning last night.
If factories are closed, are running at partial capacity, or are struggling to get raw materials to make goods, then it is no wonder that supplies will be disrupted.
"Apple's retail stores will have also been affected by the health incident in China and surrounding areas in Asia as there will have been fewer people shopping.
9.11am GMT
Germany's DAX index has dropped 0.75% in early trading, losing 105 points to 13,678.
Industrial groups are leading the fallers, hit by fresh concerns about China's economy and the impact of Covid-19.
9.00am GMT
Oil, a handy barometer of economic optimism, is falling too.
Brent crude has shed 1.6% to $56.73 per barrel, down $1 overnight.
8.41am GMT
Tech companies aren't the only ones suffering.
Shares in small UK manufacturer Tekmar have plunged by almost 40%, after it warned that the coronavirus is hurting business.
"China's necessary and prudent response to the outbreak of the coronavirus, including the restriction of travel in the country, is affecting the Group's performance materially in a number of ways.
8.38am GMT
Cardiff-based iPhone supplier IQE have slumped 6% in early trading -- another casualty of last night's warning.
8.35am GMT
Over in Frankfurt, shares in Apple are taking a thumping in early trading.
Apple's stock is down 5% at a285, as European traders react to last night's warning that revenue targets will be missed.
Apple -6% in Frankfurt trading https://t.co/wpubJHhxXb
8.30am GMT
Shares in STMicroelectronics, who also supply chips to Apple for the iPhone, are down 2.5%.
Overall, tech stocks are the worst-performing sector across Europe this morning - down some 1.3%.
8.16am GMT
European tech companies are being buffeted at the start of trading, thanks to Apple's warning last night.
Anglo-German chip designer Dialog Semiconductor has plunged 6%, It supplies various technology for the iPhone, including power management systems.
8.04am GMT
Oof! Britain's FTSE 100 index has fallen 1%, or 72 points, at the start of trading to 7362.
That's a two-week low, as Apple's virus warning sends a shiver through the City of London.
7.59am GMT
Banking giant HSBC has added its voice to the growing chorus of concerns over the coronavirus.
HSBC's interim chief executive, Noel Quinn said there had been significant disruption for staff, suppliers and customers, particularly in mainland China and Hong Kong.
"Depending on how the situation develops, there is the potential for any associated economic slowdown to impact our expected credit losses in Hong Kong and mainland China..
"Longer term, it is also possible that we may see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains. We continue to monitor the situation closely."
Related: HSBC to cut 35,000 jobs worldwide as profits plunge
7.57am GMT
Mining giant BHP Billiton has also warned that the coronavirus is threatening its operations.
BHP told shareholders that it will revise down its expectations for economic and commodity demand unless the outbreak is "demonstrably well contained within the March quarter".
More signs of the ongoing, likely temporary disruption to the Chinese economy. Weekly data shows iron ore imports fell to the lowest since at least 2015 early this month pic.twitter.com/vzJrnqgaJq
7.48am GMT
Britain's accountancy watchdog has warned UK companies not to be shy about spelling out the impact of coronavirus on their businesses.
The Financial Reporting Council said in a statement.
"We encourage companies to consider carefully what disclosures they might need to include in their year-end accounts relating to these events."
7.41am GMT
Here's the damage in the Asia-Pacific markets today, after Apple became the highest profile market victim of the virus impact so far.
7.41am GMT
South Korea has warned it faces an economic 'emergency' from the coronavirus, in another sign that the outbreak is causing deeper damage to the global economy.
President Moon Jae-in told a cabinet meeting in Seoul that the economy is in an emergency situation, and needs stimulus to lift domestic demand.
"We should take every possible measure we can think of...
The current situation is more serious than we thought . . . we need to take emergency steps in this time of emergency."
7.23am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Related: Apple warns of coronavirus causing iPhone shortages
"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."
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."
Related: Apple warns of coronavirus causing iPhone shortages
Maybe it needs $1.4tn comp to sound alarm bell: Apple warns that quarterly rev would fall short of $63-67bn guidance it gave few wks ago b/c of supply&demand shock in China. Ripple effects from coronavirus may become apparent, hit mkts in complacency mode. https://t.co/xMMP33c52G pic.twitter.com/3EwZfaFwuM
European Opening Calls:#FTSE 7391 -0.56%#DAX 13712 -0.52%#CAC 6054 -0.52%#AEX 626 -0.47%#MIB 25036 -0.34%#IBEX 9973 -0.50%#STOXX 3833 -0.52%#IGOpeningCall
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.
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