Apple shares lose €41bn as virus hits vulnerable supply chain
An Apple warning about a hit to its supply chain in China stripped over €41bn from the iPhone maker's market value and sent investors seeking out the next corporate victim of the deadly coronavirus outbreak.
Shares in the phone giant slid at one stage by over 2.5% after it said that it won't hit its March quarter revenue target as the restart from the huge disruption caused to its manufacturing supply chain in China has been slower than expected.
That has led to temporary iPhone shortages and a hit to global revenues, with Apple product sales in China itself curtailed as it was forced to close stores across the country.
The warning hit tech shares and European and US stock indices. The price of Brent crude oil, which had already slumped in recent weeks as global demand dried up in the face of the economic fallout from the virus, slipped further to $57.23 a barrel.
Such is the size of Apple that its market value remains counted in the hundreds of billions, at €1.3 trillion, but the hit nonetheless raises questions about the world's largest manufacturers relying on the single country, China to make so many of their manufacturing products.
"The warning from Apple that markets should lower expectations for production and demand highlights the flaws in the recent fixation on Chinese stimulus as a solution to the impending slowdown in China," said Joshua Mahony, senior market analyst at online broker IG.
"The combination of cheap labour and huge economic growth in China has attracted plenty of multinationals seeking to tap into the country, yet it is those same Asia-focused firms which are at risk in this first-quarter slowdown," he said.
In Britain, the focus on the international fallout from the coronavirus crisis boosted UK-focussed shares, helped by the strong UK jobs report.
Something similar happened in Ireland, as the two stockmarket-listed homebuilders, Cairn Homes and Glenvegh Properties, defied a wide-ranging sell-off that included the banks, CRH and Smurfit Kappa. AIB and Bank of Ireland ended 3.7% and 3% lower.
Paddy Power-owner Flutter also defied the sell-off, gaining over 1% on local regulatory approval in Australia for its global acquisition of the Stars Group, while Kerry Group ended around 4% higher on its latest earnings report and after it said its supply chain had mostly avoided significant fallout from the virus.
"While global equities have taken a hit today, the bigger picture is that they have recovered most or all of their initial falls after the coronavirus outbreak first became a major concern a month ago.
But that could mean that they are now pricing in an overly rosy view of the prospects for the global economy," said Jonas Golterman, senior markets analyst at Capital Economics.
However, Capital Economics is sanguine that the worst for stocks may be in the past.
"While that is undoubtedly good news, the fact that equity markets have already rebounded means that they are probably pricing in a fairly optimistic outcome, both for the resolution to the virus outbreak and for global growth more generally.
"So they remain vulnerable to further bad news about the spread of the virus," it said.
