Asia stocks and US futures drop after Apple warning; STI down 0.4%

Japan's Topix index fell 0.6 per cent as of 9:10am in Tokyo. PHOTO: REUTERS

TOKYO (REUTERS) - US stock futures slipped from record levels on Tuesday (Feb 18) after Apple 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 dipped as much as 0.2 per cent in early Asian trade.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.20 per cent while Japan's Nikkei slid 0.8 per cent.

South Korea's Kospi index dropped 0.7 per cent while Australia's SP/ASX 200 Index dipped 0.2 per cent.

Singapore's Straits Times Index was trading down 14.17 points or 0.4 per cent to 3,198.83 at 9:11am. Singapore, which cut its growth forecast for 2020 on the virus impact, is due to announce its Budget later on Tuesday, which will feature a package of virus relief measures.

Apple told investors its manufacturing facilities in China have begun to re-open but are ramping up more slowly than expected.

"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."

In China, the number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. The World Health Organization cautioned on Monday, however, that "every scenario is still on the table" in terms of the epidemic's evolution.

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.

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

Bonds are in demand, with the 10-year US Treasuries yield falling 1.0 basis point to 1.578 per cent after a US market holiday on Monday.

Safe-haven gold also rose 0.18 per cent to US$1,584.80 per ounce.

In the currency market, the Australian dollar shed 0.15 per cent to US$0.6707. The offshore yuan was little changed at 6.9862 yuan per dollar.

The yen was little moved at 109.82 yen while the euro stood at US$1.0836, near its 33-month low of US$1.0817 touched on Monday, on mounting worries about sluggish growth in the currency bloc.

Oil prices extended gains to hit their highest levels since the end of January as expectations of potential production cuts from major producers offset concerns of slumping demand due to the coronavirus outbreak.

West Texas Intermediate (WTI) crude rose as high as US$52.41 per barrel, before giving up gains to be US$51.96 per barrel, down slightly on the day.

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