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GLOBAL MARKETS-China gains cushion Asian shares after Apple jolt; flash crash hits currencies

Published 03/01/2019, 01:54 pm
Updated 03/01/2019, 02:00 pm
© Reuters.  GLOBAL MARKETS-China gains cushion Asian shares after Apple jolt; flash crash hits currencies
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* MSCI Asia Ex-Japan erases early losses

* China central bank widens scope of targeted RRR cut

* Currency 'flash crash' sends yen soaring

By Andrew Galbraith

SHANGHAI, Jan 3 (Reuters) - U.S. stock futures fell on Thursday after a rare revenue warning from Apple Inc added to worries about slowing global growth, but a move by China's central bank to help struggling smaller firms lifted shares there, cushioning losses for Asian markets.

The Cupertino, California-based tech giant blamed fewer iPhone upgrades and slowing sales in China in warning about revenues in its most recent quarter, its first such warning since 2007. Its shares AAPL.O tumbled 8 percent in after-hours trade. news also sparked a 'flash crash' in holiday-thinned currency markets as investors rushed to less risky assets, with the Japanese yen soaring against most major currencies in a matter of seconds. FRX/

MSCI's broadest gauge of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped in early trade but later steadied as Chinese shares climbed. Japanese markets were closed for holidays but Nikkei futures NKc1 dropped 1.8 percent.

China's blue-chip CSI300 index .CSI300 was 0.8 percent higher, and Hong Kong's Hang Seng .HSI gained 0.4 percent after a bruising Wednesday session.

China's central bank said late on Wednesday it was adjusting policy to benefit more small firms which are having trouble obtaining financing, in its latest move to support the cooling economy. step "is aimed at getting banks of all sizes to lend to SMEs through offering incentives, and is part of the government's pledge to support private investment," analysts at Everbright Sun Hung Kai said in a note.

"Chinese authorities have got the luxury of having control not just of the fiscal parts of the government's tool case, but also the monetary parts of the government's tool case," said Jim McCafferty, head of equity research, Asia ex-Japan at Nomura.

"What's going on right now between the U.S. and China, a lot of this is not just about trade, a lot of it is about soft power. And the stock market is an instrument of soft power, and if the Chinese authorities are able to to influence the value of the stock market, they will do whatever it takes to make sure that that happens," he said.

More growth boosting measures are widely expected in China amid expectations the economy will continue to slow in early 2019. Weak China December factory readings this week have spurred a fresh round of selling in global markets.

Apple's surprise announcement weighed on tech shares across Asia, most notably in Taiwan and South Korea.

Australian shares .AXJO bounced 1.4 percent after the previous day's drubbing, helping to offset weakness elsewhere in the region. A weaker Aussie dollar, which fell to near decade lows, also boosted exporters. AUD=

The mixed performance in Asia comes after shares on Wall Street slid in early trade Wednesday on growth worries but later clawed back losses, with a surge in oil prices driving gains in energy shares. .N

U.S. stock futures were still pointing lower on Thursday, with Nasdaq E-mini futures NQc1 down 1.9 percent and S&P 500 E-mini futures ESc1 off 1.1 percent following Apple's warning.

Apple specifically highlighted slowing Chinese growth and Sino-U.S. trade tensions, exacerbating investors' concerns about the state of the global economy.

"The fall in the EM manufacturing PMI last month was fairly broad-based and supports our view that growth in the emerging world as a whole will slow this year," Gabriella Dickens, an economist at Capital Economics, said in a note.

News out of Washington on Wednesday added to the grim mood, as a meeting between President Donald Trump and U.S. congressional leaders produced no agreement to end a partial government shutdown.

Trump's demand for $5 billion in funding for a wall along the U.S.-Mexico border triggered the shutdown affecting about a quarter of the federal government and 800,000 federal workers. CRASH'

Currency markets saw a wild spike in volatility in early Asian trade, with risk aversion pushing the yen sharply higher against the U.S. dollar, breaking key technical levels and triggering stop-loss sales of U.S. and Australian dollars. dollar was last 1.2 percent weaker against the yen JPY= at 107.52, while the Australian dollar at one point hit levels against the Japanese yen not seen since 2011. AUDJPY=D3

The euro EUR= was up less than 0.1 percent, buying $1.1349, and the dollar index .DXY , which tracks the U.S. currency against a basket of major rivals, was 0.16 percent weaker at 96.666.

Amid the flight to perceived safety, the yield on benchmark 10-year Treasury notes US10YT=RR fell to 2.6328 percent compared with its U.S. close of 2.661 percent on Wednesday.

The two-year yield US2YT=RR , was at 2.4777 percent compared with a U.S. close of 2.504 percent as signs of slowing growth ate away at expectations of further Federal Reserve rate hikes.

U.S. crude CLc1 dipped 1.38 percent at $45.90 a barrel after a sharp rise on Wednesday. Brent crude LCOc1 was down 0.5 percent at $54.62 per barrel.

Gold was higher as the dollar weakened, with spot gold XAU= trading up 0.3 percent $1,288.22 per ounce. GOL/

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