Yen Pares Loss on Apple Announcement, Pound Falls: Markets Wrap

(Bloomberg) -- The Japanese yen pared its earlier decline after Apple Inc.’s announcement that it would miss revenue guidance for the March quarter because of the coronavirus outbreak in China. The pound fell after Prime Minister Boris Johnson’s envoy attacked the EU’s stance ahead of trade talks.

Elsewhere, European equities climbed alongside U.S. index futures on Monday following China’s pledges to support its economy in the face of the coronavirus outbreak. Carmakers led a modest gain in the Stoxx Europe 600 Index, while HSBC Holdings Plc climbed before reporting earnings Tuesday. Health-care giant Bayer AG dropped after losing its first U.S. trial over the herbicide dicamba. Contracts on the three main American indexes increased, though Wall Street was shut for a holiday and Treasuries didn’t trade. European bonds were mixed. The euro pared an earlier gain after closing at its lowest since early 2017 on Friday, while the dollar was steady against a basket of its biggest peers.

Global iPhone supply will be temporarily constrained as conditions in China return to normal more slowly than expected, Apple said in a statement on Monday. The announcement followed China’s plans to reduce corporate taxes and fees, which helped push up the benchmark CSI 300 Index. The index has now recouped its losses from an almost 8% tumble when trading resumed after the Lunar New Year break. The momentum failed to buoy other Asian markets, however, as stocks dipped in Seoul and Sydney while Japan’s Topix Index dropped after news the country’s economy shrank the most since 2014 last quarter.

Investors in risk assets are beginning the week on the front foot after China’s central bank also said it will let banks run up more non-performing loans. Bloomberg Economics estimated the country’s economy ran at just 40% to 50% capacity in the past week, underscoring the short-term damage done by the coronavirus. Cathay Pacific Airways Ltd., which counts on China and Hong Kong for about half of its revenue, gave a “significant” profit warning and blamed the pathogen.

“If the Chinese economy does recover and you’ve added all this fiscal and monetary stimulus into it as well, the situation could be that you have much stronger emerging markets into the second half,” Sunny Bangia, a fund manager at Antipodes Partners Ltd., said on Bloomberg TV. “A lot depends on how this virus gets contained and if it can morph into something more minor.”

Hubei, the province at the epicenter of the outbreak, reported 1,933 new cases, slightly higher than a day earlier. Concern also built around reports that more than 3,000 travelers on two coronavirus-stricken Carnival Corp. cruise ships are returning home, fanning out to more than 40 countries. Singapore’s government cut its growth forecasts, citing uncertainty over the length and severity of the outbreak. The country is expected to unveil a large stimulus package to mitigate the economic hit.

Elsewhere, Bitcoin fell as much as 8.4% from Friday, slipping back below $10,000. WTI crude oil held at about $52 a barrel.

Here are some key events coming up:

• Earnings season rolls on with results from companies including: Glencore Plc, HSBC Holdings Plc and Walmart Inc. on Tuesday; Deere & Co. results are set for Friday.
• Germany’s ZEW survey of investor confidence is due Tuesday.
• Minutes of the most recent Federal Reserve meeting are published on Wednesday.
• Indonesia is expected to cut interest rates on Thursday, following emerging-market peers from Brazil to South Africa which have lowered borrowing costs already this year.

These are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index advanced 0.3% as of 4:40 p.m. New York time.
• Futures on the S&P 500 Index increased 0.2%.
• Nasdaq 100 Index futures climbed 0.4%.
• The MSCI Asia Pacific Index fell 0.3%.
• The MSCI World Index was little changed.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The pound fell 0.3% to $1.3003
• The euro was little changed at $1.0835.
• The yen weakened 0.1% to 109.88 per dollar.
• The offshore yuan strengthened 0.1% to 6.9845 per dollar.

Bonds

• Germany’s 10-year yield was unchanged at -0.403%.
• Britain’s 10-year yield advanced one basis point to 0.639%.
• France’s 10-year yield declined one basis point to -0.165%.
• Japan’s 10-year yield slipped one basis point to -0.033%.

Commodities

• West Texas Intermediate crude gained 0.5% to $52.33 a barrel.
• Gold weakened 0.2% to $1,581.13 an ounce.
• LME aluminum decreased 0.1% to $1,721 per metric ton.
• Iron ore advanced 1.2% to $88.80 per metric ton.

--With assistance from Andreea Papuc and Adam Haigh.

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Yakob Peterseil, Sebastian Boyd

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