Yen Jumps as Apple’s Rare Revenue Warning Triggers Risk-Aversion Mood
The Japanese yen jumped on Thursday in Asia after Apple Inc. issued a rare revenue warning that triggered a risk-aversion mood in markets.
The USD/JPY pair declined 1.5% to 107.21 by 11:23 GMT (04:23 GMT).
The gain in yen came after Apple lowered its forecast to $84 million in revenue for its fiscal first quarter ended Dec. 29, underperforming analysts’ expectations of $91.5 billion.
The company initially forecasted revenue of between $89 billion and $93 billion.
Apple shares (NASDAQ:AAPL) tumbled in after-hours trade, as traders fled to the safety of the highly liquid yen. The yen also received some support this week amid weaker-than-expected PMI data out of China.
Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies slipped 0.2% to 96.155.
The Australian dollar, often considered a gauge of global risk appetite, fell 0.6% against the U.S. dollar to 0.6946.
The U.S.-Sino trade talks later this month could potentially improve the outlook for the Aussie dollar, some analysts said.
“These talks need to yield agreement to a reasonably comprehensive deal as a minimum prerequisite for a recovery in global risk asset sentiment and a stronger Australian dollar,” said Ray Attrill, head of currency strategy at NAB in a note.
“If so, we’d expect Aussie dollar to be trading back reasonably comfortably above 0.70 before Q1 is out.”
Elsewhere, the USD/CNY pair rose 0.2% to 6.8861 as the People’s Bank of China (PBoC) has set the yuan reference rate for today at 6.8631, compared to yesterday’s rate of 6.8482.
UK services growth drops to two-year low in fourth-quarter in Brexit ‘stasis’: BCC
Businesses in Britain’s dominant services sector reported the slowest sales growth in two years during the final three months of 2018, another sign of a slowing economy ahead of Brexit, the British Chambers of Commerce said on Thursday.
Many retailers had reported difficulties in the run-up to Christmas, but Thursday’s findings — from Britain’s largest private-sector economic survey — point to a broader slowdown among businesses that rely on consumer spending.
Manufacturers also reported weaker sales growth, and orders slowed across the board befoe Britain’s planned departure from the European Union on March 29.
“The UK economy is in stasis,” BCC director general Adam Marshall said. “With little clarity on the trading conditions they’ll face in just two months’ time, companies are understandably holding back on spending and making big decisions about their futures.”
The Bank of England estimates overall economic growth slowed to 0.2 percent in the final quarter of 2018 from 0.6 percent in the three months before.
Prime Minister Theresa May is struggling to overcome deep opposition to her Brexit plan in her own Conservative Party, raising the risk that no transition period will be provided to ease Britain out of its four-decade-long membership of the EU.
The BCC’s survey of more than 6,000 businesses was carried out from Nov. 5 to Nov. 26, before a lack of parliamentary support forced May to postpone a vote on her Brexit deal.
On Wednesday, a survey of manufacturing purchasing managers showed an unexpected pick-up in growth, but it was driven primarily by businesses seeking to stockpile goods in case of border delays following a possible no-deal Brexit in March.
Despite Brexit worries, most businesses in the BCC survey said they were finding it hard to recruit staff. Manufacturers reported the joint-greatest recruitment difficulties since the survey started in 1989, and the situation for services businesses eased only slightly from a record high in the third-quarter survey.
The BCC again urged the government to limit the scale of likely post-Brexit restrictions on immigration, after a public body advised politicians last month to bar most foreign workers earning under 30,000 pounds ($38,000) a year.
“Companies must be able to access skills at all levels without heavy costs or bureaucracy,” Marshall said.
Stock Market News
U.S. stocks higher at close of trade; Dow Jones Industrial Average up 0.08%
U.S. stocks were higher after the close on Wednesday, as gains in the Oil & Gas, Telecoms and Consumer Services sectors led shares higher.
At the close in NYSE, the Dow Jones Industrial Average rose 0.08%, while the S&P 500 index gained 0.13%, and the NASDAQ Composite index gained 0.46%.
The best performers of the session on the Dow Jones Industrial Average were Goldman Sachs Group Inc (NYSE:GS), which rose 2.98% or 4.98 points to trade at 172.03 at the close. Meanwhile, Exxon Mobil Corp (NYSE:XOM) added 2.20% or 1.50 points to end at 69.69 and DowDuPont Inc (NYSE:DWDP) was up 1.94% or 1.04 points to 54.52 in late trade.
The worst performers of the session were UnitedHealth Group Incorporated (NYSE:UNH), which fell 2.26% or 5.63 points to trade at 243.49 at the close. The Travelers Companies Inc (NYSE:TRV) declined 1.99% or 2.38 points to end at 117.37 and Merck & Company Inc (NYSE:MRK) was down 1.07% or 0.82 points to 75.59.
The top performers on the S&P 500 were Arconic Inc (NYSE:ARNC) which rose 10.08% to 18.56, General Electric Company (NYSE:GE) which was up 6.34% to settle at 8.05 and Coty Inc (NYSE:COTY) which gained 5.95% to close at 6.95.
The worst performers were Hologic Inc (NASDAQ:HOLX) which was down 6.52% to 38.42 in late trade, Abbott Laboratories (NYSE:ABT) which lost 3.91% to settle at 69.50 and NRG Energy Inc (NYSE:NRG) which was down 3.76% to 38.11 at the close.
The top performers on the NASDAQ Composite were Synergy Pharmaceuticals Inc (NASDAQ:SGYP) which rose 93.15% to 0.220, Aoxin Tianli Group Inc (NASDAQ:ABAC) which was up 46.24% to settle at 1.3600 and Advaxis Inc (NASDAQ:ADXS) which gained 55.26% to close at 0.29.
The worst performers were Francescas Holdings (NASDAQ:FRAN) which was down 22.02% to 0.76 in late trade, Uxin Ltd (NASDAQ:UXIN) which lost 20.16% to settle at 3.88 and Draper Oakwood Technology Acquisition Inc Class A (NASDAQ:RBZ) which was down 17.31% to 1.72 at the close.
Rising stocks outnumbered declining ones on the New York Stock Exchange by 2185 to 910 and 48 ended unchanged; on the Nasdaq Stock Exchange, 1950 rose and 728 declined, while 43 ended unchanged.
Shares in Draper Oakwood Technology Acquisition Inc Class A (NASDAQ:RBZ) fell to all time lows; losing 17.31% or 0.36 to 1.72.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 8.65% to 23.22.
Gold Futures for February delivery was up 0.29% or 3.75 to $1285.05 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in February rose 2.64% or 1.20 to hit $46.61 a barrel, while the March Brent oil contract rose 2.34% or 1.26 to trade at $55.06 a barrel.
It’s more than just the trade war. Apple’s China business has been under pressure for a while
- China has been Apple’s “headache” for the last two years, said TuanAnh Nguyen, analyst at smartphone research company Canalys.
- Chinese players have been gaining market share despite an overall industry slowdown — global smartphone shipments fell for a fourth-straight quarter in the third quarter of last year, according to Strategy Analytics.
- The California-based iPhone-maker announced Wednesday it was lowering guidance for fiscal first quarter revenue and gross margin, hit primarily by “economic deceleration” in Greater China.
Apple CEO Tim Cook partially blamed a slowdown in China when he cut guidance for the smartphone-maker — but the company’s troubles in the world’s second-largest economy began even before trade tensions escalated.
China has been Apple’s “headache” for the last two years, said TuanAnh Nguyen, analyst at smartphone research company Canalys.
The iPhone-maker’s business strategy has focused more on a “tightly-locked ecosystem” of services and devices, which may work in mature markets such as the U.S., he noted. But it may not work as well in China, where the market is more fragmented and local rivals offer innovative alternatives for a lower price, he added.
Greater China is Apple’s third-largest market by revenue, accounting for about 18 percent in the fiscal fourth quarter.
The iPhone’s status as a highly sought-after brand in China has also turned the regional sales figure into a closely watched indicator of the country’s economic health. But even as Cook slashed the company’s revenue guidance and blamed it on Greater China’s economic struggles — exacerbated by trade tensions — there are other challenges Apple is facing.
According to Strategy Analytics, global smartphone shipments fell for a fourth-straight quarter in the third quarter of last year. But despite an overall industry slowdown, Chinese players have been gaining market share.
In the second quarter, Chinese telecom giant Huawei overtook Apple to become the world’s second-largest smartphone vendor, according to Strategy Analytics. Huawei maintained that edge in the third quarter, while other Chinese players Xiaomi and Oppo grew their global market share, the data showed. South Korea’s Samsung remains the global leader.
“There are … currently low incentives for end consumers in China to buy new phones in 2019 as they can wait for the 2020 5G smartphones,” Macquarie analysts said in a Dec. 12 note. The firm’s China technology and telecom research team expects domestic manufacturers to gain market share amid an expected third straight year of declines in China’s overall smartphone shipments.
For Apple, that competition may only grow.
Bitcoin Gains Despite Worst December in 7 Years
Cryptocurrency prices gained on Wednesday, despite Bitcoin having its worst monthly losing streak in seven years in December.
Bitcoin rose 2.2% to $3,825.30 on the Investing.com Index, as of 8:11 AM ET (13:11 GMT), after closing at $3,689 on Dec. 31, a 13% decline during the month. It was its worst month since November 2011.
Bitcoin closed down nearly 70% in 2018 and remains below the $4,000 mark. Digital coins fell dramatically towards the end of the year amid concerns of increased regulatory scrutiny and volatility.
Cryptocurrencies overall were higher, with the total coin market capitalization at $131 billion at the time of writing, compared to $125 billion on Tuesday.
Ethereum, or Ether, increased 9% to $150.60 and Litecoin was at $32.231 up 5%, while XRP jumped 3.4% to $0.36430.
Meanwhile, the UK is investigating 18 companies involved in digital coin sales, according to The Financial Times. The Financial Conduct Authority has not revealed the names of the companies, but says it suspects them of market irregularities. Another dozen or so companies were sent warnings over suspicions of investment scams.
In November the FCA had opened inquiries into 67 companies involved in digital coin offerings. The latest news indicates that 49 cases have been closed, with 39 given consumer warnings.
In other news, the Reserve Bank of India (RBI) changed plans to debut a digital currency after tightening controls on cryptocurrency exchanges, Hindu Business Line reported on Tuesday.
“The government doesn’t want the digital currency anymore. It thinks it is too early to even think about a digital currency,” Hindu Business Line quoted an anonymous source as saying.
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