European Stocks Fall on Apple Warning
European stocks edged lower as iPhone-maker Apple Inc.’s revenue warning due to the coronavirus outbreak shook the tech sector, eliminating any enthusiasm in the market.
The pan-European STOXX 600 index slipped 0.2% to €430.72, after booking a record high on Monday following China’s launch of new stimulus measures to minimize the virus’ economic impact.
However, the market’s optimism immediately faded on the US tech giant’s warning and news of a slower-than-expected recovery in its Chinese factories.
Meanwhile, stock trading in Italy resisted the negative mood. The FTSE MIB index gained 0.1% to €25,162.74 on Intesa Sanpaolo SpA’s unexpected €4.86 billion ($5.26 billion) acquisition bid for rival UBI Banca. The news sent UBI up nearly 22%, taking the lead on the STOXX 600,
The 4.7% drop in British investment firm HSBC Holdings plc, on the other hand, was one of the weakest on the index. Shortcomings in the London-based lender’s shares came after it said it would cut $100 billion in assets. And lay off 35,000 employees over three years due to its planned restructuring.
Defensive sectors like utilities and real estate strengthened as well.
Apple Warns of Missing Revenue Outlook
Apple took the tech sector by surprise on Tuesday. The smartphone maker stated that it would not be able to meet its March-quarter sales outlook. This was due to the coronavirus pushing businesses to cease operations.
The announcement left its Frankfurt-listed stocks with a near 5% loss. While its component suppliers such as STMicroelectronics and Dialog Semiconductor PLC fell 2.7% and 5.5% respectively.
The tech-heavy DAX 30 index also declined by 0.6% to €13,698.61. Whereas the European tech index tumbled by 0.9% to €565.46.
The European tech index gained over 7% this year on the likelihood of demand bouncing back amid cooling global trade tensions. Still, with China’s huge presence in the tech supply chain, the possibility of the epidemic undoing those increases remains.
There are hundreds of other companies who are in this predicament. Many have manufacturing stores in China, according to the head of TMT research Neil Campling.
The main effect of Apple having gone first will be to force others to follow soon or risk being accused of a cover-up, Campling said.
Other China-exposed sectors in Europe, including the automobile and basic resources, registered a more than 1% slump each. Both relied largely on Chinese demand for their products, with several car manufacturers also producing parts in the country.
