The Stock Market Fluctuations Tell Us Just How Much Is Riding on U.S.-China Trade Talks

NEW YORK, Nov. 13, 2018 -- Electronic screen shows the closing numbers of stock market at the New York Stock Exchange in New York, the United States, Nov. 12, 2018. U.S. stocks closed sharply lower on Monday, as steep losses in Apple shares led the tech rout, dragging the market. The Dow Jones Industrial Average slumped 602.12 points, or 2.32 percent, to 25,387.18. (Xinhua/Wang Ying) (Xinhua/Wang Ying via Getty Images)
Wang Ying—Xinhua News Agency/Getty Images

Monday’s selloff in the U.S., which saw the Dow tumble by 600 points, continued in Asia Tuesday. The original spark for the rout was Apple, which fell 5% after a key supplier of its facial recognition technology cut its outlook, pointing to weaker-than-expected iPhone demand.

So it was not very surprising to see other Apple suppliers take a hit. Japanese parts manufacturers TDK and Taiyo Yuden fell by around 6% and 7% respectively. Hon Hai Precision, better known as Foxconn, was down 2.3%. As noted by Bloomberg, Apple can make up for volume drops by raising prices, but its suppliers live on volume.

Looking at the indices, the Nikkei 225 was down by more than 2%, the Shanghai Composite by 1.2%, and the Hang Seng by 2.1%.

However, the Chinese markets rose again in the afternoon on the news that the U.S. and China have resumed trade talks. Europe’s Stoxx 600 began the day with a skip in its step, up 0.3% at the time of writing, and U.S. futures indicated a similarly bright start to Tuesday there.

The wobble serves as a reminder of how influential the tech giants—Apple in particular—are to wider sentiment, but also of how much is riding on those China talks.

The Japanese markets’ bad day wasn’t just due to Apple suppliers catching a cold, but also the fact that the country’s machine tool suppliers saw declining orders last month for the first time in two years. That reflects a Chinese slowdown that’s largely attributable to the trade war. And don’t forget how badly an escalation in the argument could hurt the tech sector, if it starts to more seriously threaten supply chains and manufacturing deals.

Consider this latest stumble a taste of what is to come if Washington and Beijing can’t find a solution to their spat.

A version of this story first appeared in Fortune’s CEO Daily newsletter. Subscribe here.

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