FTSE drops as Apple sounds warning bell
Fiona Cincotta February 18, 2020 9:46 AM
The real toll of the coronavirus on businesses is starting to become more apparent now hitting risk sentiment
The real toll of the coronavirus on businesses is starting to become more apparent now that Apple has warned that it would not be able to meet its revenue target in March because of lower sales in China, but also because of production disruptions cause by stoppages at the company’s suppliers. A surprisingly high number of industries, particularly car makers, depend on components made in China and given that factories there have been shut for between one and three weeks, expect more companies to sound a warning about disruptions to their production over the coming weeks.
In contrast to Apple, HSBC pointed the finger of blame on Brexit, and to a lesser extent historically low interest rates around the world for a decline in the bank’s revenue and the decision to cut a whooping 35,000 jobs over the next two years. The coronavirus also received an honorable mention as one of the culprits but one that will only start affecting results in future quarters.
Apple’s warning pulled down the FTSE in early trade and the sell-off in miners and travel firms added additional weight. Safe haven stocks like utilities and gold miners provided some counterbalance as did a bounce back from the embattled health operator NMC Health.
Brent declines as Russia avoids output cut
Brent crude prices lost just short of 2% as oil traders waited in vain for OPEC and Russia to agree on fresh production cuts. Crude oil rallied on Friday on hopes that Russia would agree to a proposal by OPEC’s technical committee to restrict OPEC+’s collective production by 600,000 bbl to balance out the loss in demand caused by the coronavirus. However, Russia successfully dragged its feet until news from Asia become less panicked and started to indicate that China would come back on line before the end of February.
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