Apple’s sales warning hits European stocks as it places the blame on China

Apple sent shockwaves through global markets last night after it issued a second consecutive warning against its sales performance, causing suppliers' stocks, European markets and emerging currencies to spiral.

Chief executive Tim Cook cut Apple's quarterly sales target late last night, blaming weak iPhone sales in China and fewer customers upgrading their iPhones in an open letter to investors. 

Sparking fears of a potential worsening of the US-China trade dispute, major European stocks opened in negative territory, with the FTSE slipping 0.2 per cent as markets opened this morning. Frankfurt's Dax fell as much as 0.8 per cent, while France's Cac dropped 0.7 per cent.

Currencies were similarly affected, particularly in China and in emerging markets where large manufacturing companies can rely on business from Apple. The Japanese yen spiked as a result, taking in its biggest daily rise in 20 months.

European-listed suppliers such as UK chipmaker Dialog Semiconductor and Austrian manufacturer AMS fell in early trading this morning, sliding 10 and 21 per cent respectively. 

Asian suppliers were also affected, with Taiwanese product assembly firm Foxconn falling as much as 1.6 per cent and Taiwan Semiconductor Manufacturing Company (TSMC) sliding as much as 2.3 per cent. The news had a knock-on effect on other tech stocks in the region, as South Korea-based Samsung Electronics slipped 1.9 per cent and Hong Kong-listed AAC Technologies down two per cent.

Cook said Apple is anticipating revenue for the last three months of 2018, often deemed the most profitable time in retail thanks to Christmas and other gift-giving holidays, to be around $84bn (£66.8bn). This is down five per cent from the same period in 2017, and $9bn lower than Apple's original forecast for the quarter.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," he wrote.

 Apple has attributed "more than 100 per cent" of its sales decline to lower demand for its products in China. Cook warned in November that the company would no longer be disclosing sales figures for specific products such as the iPhone and iPad, convincing investors that falling overall revenue numbers were on the horizon.

The company's share price took a dive in after-market trading, falling as much as 8.6 per cent overnight to a potential 18-month low.

"A flagging Chinese economy and fewer upgrades are the headline reasons for Apple’s stumble, but read between the lines and the tech giant is just a whisker away from suggesting it may have pushed customers too hard on price," said Hargreaves Lansdown equity analyst Nicholas Hyett.

"… Unless the company can deliver another Steve Jobs style breakthrough, the days of technological supremacy and the pricing power that comes with it may be numbered."