Economic impact widens as Coronavirus hits demand and output in China

Updated: Feb 19, 2020, 09:23 IST | Agencies | Hong Kong

HSBC plans job cuts as profits slide, Apple says the epidemic will hit iPhone supplies worldwide

Another 88 people aboard the cruise ship quarantined off Japan test positive, taking the total number of cases on the Diamond Princess to 542; around 500 passengers, who tested negative for the novel Coronavirus, will leave on Wednesday, said officials in Tokyo. Pic/AFP
Another 88 people aboard the cruise ship quarantined off Japan test positive, taking the total number of cases on the Diamond Princess to 542; around 500 passengers, who tested negative for the novel Coronavirus, will leave on Wednesday, said officials in Tokyo. Pic/AFP

Hong Kong: Asian markets tumbled on Tuesday after Apple warned the new coronavirus had hit output and demand in China, fuelling fears over the wider impact of the epidemic on corporate earnings and economic growth. Investors looked past a positive lead from European bourses to focus on the spiralling fallout from the virus that has so far killed 1,868 people and infected 72,436, mostly in mainland China. Officials said the number of deaths and infected cases have declined.

But the virus has sparked panic buying, economic jitters and the cancellation of high-profile sporting and cultural events. "Best to buckle in as we could be in for a bumpy ride (over) the next few weeks," said Stephen Innes of AxiCorp. "I'm struggling to find any research report that doesn't suggest (COVID-19) could significantly affect short term earnings."

Apple will miss its revenue forecast for the March quarter due to the epidemic and warned that iPhone supplies worldwide would also be impacted, underlining the economic cost of the health crisis. "We are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter," Apple said in a statement.

It said that worldwide iPhone supply would be "temporarily constrained" as its manufacturing partners in China were only slowly ramping up work after being closed due to the virus. Consumer demand in the crucial Chinese market has also been dampened after all Apple stores were shut.

35,000 job cuts in 3 years
"Maybe this is the wake up call. I would be astonished if Apple is the only one. Every electronic supply chain runs through China in a big way," Reuters quoted Stacy Rasgon, a Bernstein analyst, as saying. Meanwhile, HSBC announced a radical overhaul on Tuesday, including plans to slash 35,000 jobs and slim operations in the US and Europe, after profits slid by a third last year.

The Asia-focused lender has been trying to lower costs as it faces a multitude of uncertainties caused by the grinding US-China trade war, Britain's departure from the European Union and now the deadly new coronavirus in China. Noel Quinn, the acting CEO, told Bloomberg News that the global headcount would be cut from 235,000 to 200,000 over the next three years, although no details were given on where the axe would fall. The bank said it was targeting $4.5 billion in cost cuts by 2022.

Palestinian traders worried
The economic symptoms of the outbreak are starting to appear even in the West Bank city of Hebron, Palestine, which is separated from the epicentre of China's virus outbreak by over 4,000 miles and a ring of Israeli checkpoints. Palestinian markets have long been flooded by low-cost Chinese goods. Traders in Hebron, the largest Palestinian city and a commercial hub for the territories, fear that if the outbreak and quarantine efforts continue they will have to switch to more expensive alternatives, passing higher prices on to consumers in an already weakened economy.

Their concerns point to the potential for wide-ranging ripple effects from the outbreak in China, the world's largest exporter. The health crisis has already thrown the global travel industry into chaos and threatened to disrupt supply chains around the world that depend on China. That a city deep inside the Israeli-occupied West Bank is so reliant on Chinese goods illustrates the perils of global economic integration.

35k
No. of jobs HSBC plans to slash

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