Published: Mon, January 07, 2019
Money | By Ethel Goodwin

Apple: iPhone demand waning

Apple: iPhone demand waning

Greater China is an informal term usually used by multinational companies to refer to their business operation area that encompasses the Chinese mainland, Taiwan, Hong Kong and Macau.

Goldman Sachs told clients Wednesday that the iPhone maker will likely have to bring down numbers for the full year.

Apple's outlook revision along with a double-digit drop in earnings at commodities giant Cargill Inc on Thursday may be among the clearest warning signs yet that the trade war's effects have begun to hit U.S. companies.

The clash reflects American anxiety about China's emergence as a competitor in telecoms, solar power and other technologies and complaints by Washington, Europe and other trading partners that Beijing's tactics violate its market-opening obligations.

The dispute has rattled companies and financial markets that worry it will drag on global economic growth that is showing signs of declining.

Samsung said last month it would cease operations at one of its mobile phone manufacturing plants in China, after seeing its share of the Chinese market drop to 1 percent in the first quarter of 2018 versus 15 percent in mid-2013.

Trump said he has urged Apple chief Tim Cook to "make your product in the United States" rather than China.

In his letter, Cook said Apple has $130 billion in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks. Some pessimistic economists have even projected an imminent global recession.

"Apple makes their product in China", Trump said. -China trade dispute, a strong report on the market and encouraging comments from the head of the Federal Reserve about the central bank's interest rate policy all combined to cheer investors.

The stock price of Apple Inc. sank 9.86 percent on Thursday, wiping out 73.79 billion dollars of market capitalization.

Analysts on average expect S&P 500 companies to increase their earnings per share by almost 7 percent this year, down from a forecast of 10 percent growth at the start of October and far below their expectations of 24 percent EPS growth for 2018, according to the most recent estimate from Refinitiv's IBES.

"If we have a successful negotiation with China, then Apple's sales and everybody else's sales will recover", White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with CNN. The 10-year Treasury yield tumbled to an 11-month low of 2.56% on Thursday, a sharp decline from 3.23% in November.

The news, which comes as a spotlight grows on Beijing's attempts to revive stalling growth, sent Apple shares tumbling in after-hours trade, hammered Asian suppliers and triggered a broader selloff in global markets.

"While Tim Cook blamed a slowing China economy and trade tension, we maintain that in our opinion the iPhone ASP is the biggest problem given uninspiring specs and rising competition in China and in Europe", the analysts wrote.

Japan's Nikkei index dropped 2.3% Friday, that market's first day of trading following the New Year break.

Wall Street analysts scrambled to cut their price targets on Apple, with at least 27 lowering their estimates. Build those plants in the US. Other tech and media stocks climbing Friday included Twitter (up 7% to $29.95), Lionsgate (up 6.6% to $17.40), Amazon (up 5% to $1,575.39), Alphabet (up 5.1% to $1,078.71), Apple (up 4.3% to $148.26), Facebook (up 4.7% to $137.95) and Disney (up 3.1% to $109.61).

But the company now expects its annual revenue to fall 5 percent from the previous year's level. "We were surprised about the magnitude of the miss and the negative impact of China demand for iPhones", Citi said in a note this week. Copper rose 3.1 percent to $2.65 a pound.

Market participants were awaiting nonfarm payroll numbers due out later Friday for further clues on the health of the US economy.

That all came before the damage to the Chinese economy from trade tensions with the United States and long-simmering structural issues became evident.

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