Apple shares dive; rare revenue warning drags global markets

Anna Jefferson
January 5, 2019

Any new product offering from Apple is unlikely to be revealed before September, when the company traditionally unveils its new iPhones.

Some of the worst drops were at chipmakers that make parts for smartphones and other gadgets.

Apple CEO Tim Cook delivers the keynote address at the Apple 2012 World Wide Developers Conference (WWDC) at Moscone West on June 11, 2012 in San Francisco, California. "Therefore, Apple's rare profit warning is a red flag for market watchers".

Even the devices Apple already makes in India - the iPhone SE and iPhone 6S - are out of reach for most people. Cook blamed the macroeconomy and U.S.

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Now the ongoing trade war between the USA and China may be having even more of an impact. Investors fear a slowdown of the world's second largest economy, which has been under pressure from a trade dispute between Washington and Beijing.

"The knee-jerk reaction is that it will influence trading", said David Katz, chief investment officer at Matrix Asset Advisors.

Cook also said in the letter that fewer carrier subsidies, price increases based on the strength of the USA dollar and cheaper battery replacements caused the weak iPhone upgrades for the quarter.

USA stocks fell sharply on Thursday after yesterday's surprise revenue forecast downgrade from Apple CEO Tim Cook. That's NZ$10 billion less than analysts expected.

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The firm had warned investors in November that a strengthening dollar and economic weakness in some overseas markets would be likely to hurt sales in the last three months of the year. IHS Markit's US manufacturing purchasing managers' index was 53.8 in December, the lowest reading in more than two years, and down from 55.3 in the previous month.

The S&P 500 index plunged almost 2.5 percent and the tech-heavy Nasdaq lost more than three percent. The Dow slid 2.8 percent to 22,868.22. But the Shanghai Composite index jumped 1.8 percent and South Korea's Kospi, which has a high number of tech stocks, added 0.4 percent to 2,001.80 after Thursday's lower close.

He also cited other factors that contributed to the drop in iPhone revenues such as consumers adapting to a world with fewer carrier subsidies, price hikes resulting from a stronger USA dollar, and lower price for iPhone battery replacements.

Market jitters even extended briefly to the Brexit-battered pound, which tumbled to a 21-month low close to $1.24 overnight against the United States dollar in a "flash crash" triggered by an exodus from currencies considered riskier - before very quickly recovering the losses to return to around $1.26.

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Traders braced for another dose of the turbulence that ruled equities all December after reduced guidance at Apple Inc. sent exchange-traded funds tracking major indexes falling. The stock market opened the following day with Apple down $57 billion in market value. The company also recently announced that it would stop disclosing how many iPhones it sold each quarter, a move many investors suspected was an attempt to hide bad news.

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