Tokyo — Asian shares fell and Wall Street retreated from record highs on Tuesday after Apple said it would 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 US sobered investor optimism that economic stimulus by Beijing and other countries would protect the global economy from the effects of the epidemic.

S&P 500 e-mini futures dipped as much as 0.3% in Asian trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.65%, while Tokyo’s Nikkei slid 1.0%. Shanghai shares dipped 0.2%, having gained in nine of the past 10 sessions largely on hopes for policy support by Beijing.

China’s central bank cut the interest rate on its medium-term lending on Monday, which is expected to pave the way for a reduction in the benchmark loan prime rate on Thursday.

But sentiment was shaken when Apple told investors its manufacturing facilities in China have begun to reopen but are ramping up more slowly than expected, reinforcing signs of a broader hit to businesses from the epidemic.

“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.”

Asian tech shares were also hit. Samsung Electronics dropped 2.1%, Taiwan Semiconductor Manufacturing (TSMC) lost 1.7% and Sony shed 2.6%.

In China, the number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. The World Health Organisation 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 reopen, disrupting supply chains in China and beyond, as highlighted by Apple.

“Lifting travel restrictions is taking longer than expected. Initially we thought lockdowns would end in February and factory output would normalise in March. But that is looking increasingly difficult,” said Ei Kaku, currency strategist at Nomura Securities.

Nomura downgraded its China first-quarter economic growth forecast to 3%, half the pace of the fourth quarter, from its previous forecast of 3.8%, and added there was a risk it could be even weaker.

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

Safe-haven gold also rose 0.18% to $1,584.80 an ounce.

In the currency market, the yen ticked up 0.1% to ¥109.75 per dollar, while the risk-sensitive Australian dollar lost 0.4% to $0.6707. The yuan was steadier for now, trading at 6.9866 yuan per dollar.

The euro, grappling with worries about sluggish growth in the eurozone, edged down 0.1% to $1.0836, near its 33-month low of $1.0817 touched on Monday.

Oil prices also dipped.

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


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