Apple’s unexpected warning over weak Chinese sales has stoked fears for the health of the global economy, rattling financial markets and leading traders to ramp up bets that the Federal Reserve is more likely to cut interest rates than raise them in 2019.
The iPhone maker’s first cut to its revenue forecast in 16 years put its shares on track for an 8 per cent decline yesterday — its biggest one-day drop in five years — and helped fuel a broader equities sell-off as investors fretted about the state of the Chinese market.
Kevin Hassett, chairman of the White House Council of Economic Advisers, warned that the US-Chinese trade war was likely to lead to more companies seeing lower revenues and profits this year.
“It’s not going to be just Apple, ” Mr Hassett said on Thursday. “There are a heck of a lot of US companies that have sales in China that are going to be watching their earnings being downgraded until we get a deal with China.”
The sharp drop in Apple shares means the company’s market capitalisation has fallen below that of Google parent Alphabet, at $687 billion. The iPhone maker’s valuation had already been overtaken by tech rivals Amazon and Microsoft at the end of last year. Apple’s value peaked at $1.12 trillion in early October.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Tim Cook, Apple’s chief executive, said.