A "flash crash" saw the yen smash through levels it had held for almost a decade. Apple's revenue cut was the trigger, but unease about global economic and political fundamentals remains the underlying cause.
Apple's shock announcement on Wednesday evening that it was cutting its revenue forecast has hit US and European stock exchanges, with the company's shares down 7.45 percent in after-hours trading in the United States, slashing $55 billion (€48.4 billion) off its value.
The Apple news sparked a sell-off in the currency market, with the Japanese yen, usually seen as a safe haven in periods of market turmoil, up about 3.7 percent to 104.87 against the dollar.
"The moves were very violent," Stephen Miller, an adviser at Grant Samuel Funds Management in Sydney, told Bloomberg. "It would have caught some by big surprise."
Apple blamed weak demand in China and the US-China trade conflict, and companies with large Chinese sales volumes were indeed caught in traders' headlights. Watchmaker Swatch and Kering, a luxury goods brand owner, both fell, while Burberry was down by 3 percent.
"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," Apple Chief Executive Tim Cook told investors. He said the tariffs row had "put additional pressure" on an already slowing Chinese economy. China is Apple's third-largest market after the US and Europe.
Weighed down already by a combination of fears of a slowing Chinese economy, a government shutdown in the US and the growing awareness that 2019 could see the end of the growth cycle, markets reacted the way they did. Add an illiquid currency market and superfast technology and you have the recipe for the perfect financial storm.
Apple loses bite
Apple said it expects sales revenue for the three months to 29 December of about $84 billion, down from an earlier estimate of $89 billion to $93 billion. Analysts had been expecting revenues of about $91 billion, according to market analyst FactSet.
In August Apple was the world's biggest firm and became the first publicly traded company to be valued at $1 trillion, but its subsequent poor performance has been similar to those of its fellow Faang companies — Facebook, Apple, Amazon, Netflix and Google.
Market participants said the move was a "flash crash" and had been driven primarily by technical, not fundamental, factors. A flash crash stems from trades made in so-called black-box trading, that is high-frequency trading driven by preset reactions to changes in given markets. In this case, the rush to the safety of the yen saw the Japanese currency rise, which in turn caused programs to kick in that were set up by yen short traders to avoid losses.
"The Apple news is driving safe haven flows, which have seemingly triggered a flash crash in forex," Brad Bechtel, global head of foreign exchange at Jefferies LLC, said.
Flash crashes have happened before. The pound fell 6 percent in two minutes in October 2016 amid concerns over Brexit, while in in May 2010 a $4.1 billion trade on the New York Stock Exchange resulted in a loss to the Dow Jones Industrial Average of over 1,000 points within about 15 minutes.