Apple CEO Tim Cook introduces Apple Card during a launch event at Apple headquarters on March 25 in Cupertino, California. Photo: AFP / Noah Berger

Oil weakens on demand worries; US Treasuries, gold and yen catch the safe haven bid

Trade of the Day: Stocks retreat as Apple’s warnings triggers supply disruption fears; oil weakens on demand worries; US Treasuries, gold and yen catch the safe haven bid.  

Quote of the Day:  “We do not see any major pre-election trade actions by the US. The Trump administration can point to the US-Mexico-Canada Agreement (USMCA) and the ‘phase one’ deal with China as trade successes. US officials may threaten tariffs but are unlikely to risk a rise in consumer prices ahead of the election,” said Standard Chartered analysts in a note released on Tuesday.

Stock of the day: Property management company Binjiang Service rose as much as 9.3%  after it said profit in the year 2019 would register an increase of over 50%. “The increase in consolidated net profits was mainly due to (1) the addition of new projects and gross floor area of properties under the management of the Group; and (2) the increases in revenue of value-added services for property owners and non-property owners,” the company said in a statement.        

Number of the Day:. 4% – Investor average cash balance, according to BofA Global Research February Fund Manager Survey published on Tuesday. It is the lowest level since March 2013. 221 panelists with $676 billion AUM participated in total.

Tip of the Day: ”The outbreak has limited impact on the production of drug makers, and there should be increased demand for anti-virals, antibiotics and respiratory drugs, but normal promotions of high-end drugs were disrupted. As CNY is generally low season for pharmaceuticals, the overall impact on drug makers should be slight positive from increased demand, unless there is a prolonged period of disruption to marketing activities of high-end drugs,” said Jefferies analysts in a note. “Names like CSPC (1093 HK), Sino Biopharm (1177 HK), HEC (1558 HK) and CTCM (570 HK) should benefit from increased sales of their products.”

Investors scrambled for the exits on Tuesday after technology behemoth Apple warned it did not expect to meet the revenue guidance provided for the March quarter. It said the revenue hit will be on account of supply shortages as well as muted demand in China. 

MSCI Asia Pacific ex-Japan slid 1.2%, Nikkei 225 tumbled 1.4% and Australia’s S&P ASX 200 edged down 0.2%. The Hang Seng index retreated 1.47% as losses in property, technology and basic materials pulled down the Hong Kong benchmark.

“Apple is one of the largest companies on the planet – its massive in scale and when they say they will be impacted by the virus by more than they expected, it’s got people thinking about how severely the supply chain has been hit by this epidemic,” said Marshall Nicholson, Nomura’s head of ECM Asia ex-Japan, told Asia Times.

“Consumers may delay their purchases as there is a fear of the unknown and how long it may last, which in turn causes tremendous psychological impact in the immediate term,” he said.

European stocks and US futures followed their Asian counterparts lower with the Stoxx Europe 600 Index 0.4% lower and the futures on the S&P 500 Index off by 0.5%.

“Disappointing pre-announcement from the world’s largest publicly-traded company is cause enough for a pullback in major US indices by itself, but traders are also extrapolating what Apple’s announcement may mean for other globally-integrated firms which could see similar interruptions in the weeks to come,” said Matt Weller, global head of market research at GAIN Capital. “Though the interruption to the global economy from coronavirus will be significant, traders are already looking ahead to the potential for more fiscal and monetary stimulus to offset the disruption.”

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Umesh Desai

Umesh Desai is Asia Times Finance Editor. Prior to his current role he was at Reuters for 19 years before which he was a credit ratings and equity research analyst. A chartered accountant by training, he is based in Hong Kong.