London open: Stocks drop after Apple warning but retailers get a boost from Next

At 0830 GMT, the FTSE 100 was down 0.5% at 6,703.59, while the pound was off 0.4% against the dollar at 1.2557 and 0.6% lower versus the euro at 1.1050.

Apple said after the close of US markets on Wednesday that its first-quarter sales would be lower than expected due to weaker sales in China.

The company said it now expects revenues of around $84bn in the three months to 29 December, down from previous guidance of between $89bn and $93bn. This would mark Apple’s first year-on-year quarterly drop since 2016.

In a letter to shareholders, chief executive Tim Cook highlighted slowing growth in China and trade tensions with the US.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China," Cook said.

Neil Wilson, chief market analyst at Markets.com, said: "For a while now there’s been an adage in the markets that as long as Apple was doing fine, everyone else would be OK. Therefore, Apple’s rare profits warning is a red flag for market watchers. The question is to what extent this is more Apple-specific, or more macro?"

"Certainly, last night’s letter to investors from Apple has sent shockwaves through the markets - Apple shares tanked more than 7% in after-hours trading, while US stock futures have also shot lower after a flat session."

Wilson said that while the a lot of the issues are specific to Apple, the warning also says a lot about what is happening in the broader global economy, specifically China.

"It tells us that China is experiencing a period of softness. Most of Apple’s revenue shortfall versus guidance, and over 100% of its year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad, the company said. It tells us that the trade war between the US and China is having a dampening effect on demand and activity. It is also a factor of dollar strength."

The Japanese yen surged to an eight-month high against the dollar after the Apple warning, breaking through key technical support levels as investors looked for a safe haven trade. In what was being described as a "flash crash" in currency markets, the yen also rose nearly 8% against the Australian dollar to its best level since 2009, and 10% versus the Turkish lira.

On the corporate front, high street fashion retailer Next was the standout gainer after it trimmed its full-year profit guidance to £723m from £727m but posted a 1.5% jump in sales over the key Christmas period. The update lifted the sector, with Marks & Spencer, Primark owner AB Foods and JD Sports all trading higher.

Richard Hunter, head of markets at Interactive Investor, said: "Given recent disappointments, Next has staged something of a late recovery in an attempt to salvage its year, with the share price reacting accordingly.

"Next remains a well-managed company which understands its own business as well as the cut-throat sector in which it operates. Careful management of its finances continues to bear fruit against this backdrop, and the outlook for the forthcoming trading year anticipates similar themes, with an estimated 8.5% decline for retail sales but a hike of 11% for online."

"At the same time, Next anticipates a cash surplus of some £300m, which would, in the present environment, be earmarked for share buybacks. This should lead to some support for the share price, whilst the current dividend yield of 3.8% is reasonably attractive."

Elsewhere, budget airline Ryanair flew a little higher as it said total traffic in December grew 12% to 10.3m passengers.

On the downside, miners retreated, with Antofagasta, Rio Tinto, Glencore and Anglo American in the red.

Equipment rental firm Ashtead was also weaker after saying it has extended the maturity of its senior credit facility to December 2023 and increased it to $4.1bn.

British Land, Experian, Auto Trader, Aveva, Dairy Crest and McCarthy & Stone were among the companies whose stock went ex-dividend.

Market Movers

FTSE 100 (UKX) 6,703.59 -0.45%
FTSE 250 (MCX) 17,513.42 -0.42%
techMARK (TASX) 3,318.12 -0.10%

FTSE 100 - Risers

Next (NXT) 4,386.00p 5.00%
Marks & Spencer Group (MKS) 254.70p 2.70%
Associated British Foods (ABF) 2,114.00p 2.03%
Fresnillo (FRES) 898.40p 1.17%
Vodafone Group (VOD) 156.68p 1.12%
Morrison (Wm) Supermarkets (MRW) 213.70p 0.90%
International Consolidated Airlines Group SA (CDI) (IAG) 610.40p 0.83%
BT Group (BT.A) 241.65p 0.69%
British American Tobacco (BATS) 2,493.00p 0.56%
ITV (ITV) 125.65p 0.56%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,667.00p -3.39%
Experian (EXPN) 1,832.00p -2.73%
Intertek Group (ITRK) 4,692.24p -2.59%
Antofagasta (ANTO) 755.80p -1.90%
Evraz (EVR) 471.10p -1.69%
Smith & Nephew (SN.) 1,407.00p -1.54%
Schroders (SDR) 2,436.00p -1.50%
St James's Place (STJ) 943.60p -1.19%
Rio Tinto (RIO) 3,647.50p -1.17%
Hargreaves Lansdown (HL.) 1,835.50p -1.16%

FTSE 250 - Risers

Contour Global (GLO) 183.10p 3.10%
JD Sports Fashion (JD.) 363.70p 2.34%
Wizz Air Holdings (WIZZ) 2,810.00p 2.11%
Hochschild Mining (HOC) 167.65p 1.73%
Assura (AGR) 53.75p 1.61%
Syncona Limited NPV (SYNC) 272.00p 1.49%
B&M European Value Retail S.A. (DI) (BME) 288.40p 1.30%
Royal Mail (RMG) 275.80p 1.17%
Halfords Group (HFD) 262.80p 1.15%
Sirius Minerals (SXX) 21.60p 1.04%

FTSE 250 - Fallers

Euromoney Institutional Investor (ERM) 1,154.00p -3.51%
IP Group (IPO) 109.20p -2.85%
Dechra Pharmaceuticals (DPH) 2,042.00p -2.58%
McCarthy & Stone (MCS) 134.54p -2.51%
Premier Oil (PMO) 65.90p -2.23%
Polar Capital Technology Trust (PCT) 1,106.82p -2.22%
Hikma Pharmaceuticals (HIK) 1,667.50p -2.20%
Man Group (EMG) 134.50p -2.04%
Investec (INVP) 432.30p -1.95%
Murray International Trust (MYI) 1,112.00p -1.77%