Extreme market turbulence that ruled at the end of 2018 and most notably in December looks set to stay for another session. Whilst weakness in Chinese manufacturing was to blame in the previous session, Apple cutting its guidance has hit sentiment on Thursday.
Apple shocked Wall Street with an extremely rare profit warning. Softer demand in China and disappointing iPhone upgrades led to the darling of Wall Street announcing that it expected to miss revenue guidance by as much as 10%. This announcement feeds directly into the fears that have been dominating market sentiment over the past few months; slowing Chinese growth, the impact of the US – Sino trade war and technology valuations in general.
The announcement drives home the point that the US - Sino trade war is negatively impacting the global economy. Yesterday we saw global manufacturing slowing, today we saw the first trillion-dollar company cut its revenue guidance, these are warning signals that investors are hearing loud and clear.
Risk off dominated overnight, with riskier assets such as equities out of demand. Equities in Asia and Europe are seen taking another step lower and US future point to hard sell off after the opening bell.
A broad flight to safety has been evident with the safe haven Japanese yen the principal beneficiary. The Japanese yen surged over 8% versus the Australian dollar, caught in a flash crash overnight, the yen closed 2% higher versus the dollar. A combination of high market anxiety and low volumes as trading in New York ended and Japan remained closed for a public holiday saw the yen soar at least 1% versus all its G-10 peers.
US data to send USD/JPY towards 107.00?
USD/JPY hit a nine-month low of 105.00 overnight, before closing off the lows at 107.43. Any move higher has been capped by resistance at 108.00. The pair will need to see a convincing move above 108 to see a recovery towards 108.85. Technical indicators remain within bearish territory warranting some caution.Traders will be looking towards US ISM Manufacturing data later today and then non-farm payroll figures tomorrow for further clues as to the health of the US economy. ISM Manufacturing data is expected to show US manufacturing activity decline in December to 57.8 from 59.3. US non-farm payrolls are expected to show 180,000 jobs were added in December. Weakness in US data will fuel risk off sentiment pushing the yen higher back towards 107.00.