China Market Plunge Sparks Selloff in Rio Tinto, BHP Shares

China's stock rally collapsed as a lack of detailed stimulus plans caused a sharp 5% drop in the Shanghai Composite, its worst since 2020. This triggered declines in mining stocks, with Rio Tinto and BHP shares sliding amid falling iron ore prices. This follows heavy declines on Tuesday for miners, which triggered the biggest drop in the FTSE 100 for 2 months. Meanwhile, New Zealand's central bank cut rates.

Equities

The FTSE 100 dropped 1.4% on Tuesday, marking its worst day in two months as miners led the decline. The index reached a one-month low after Chinese authorities failed to provide specific stimulus measures, which impacted sentiment in industrial metal miners.

Shares of Vistry Group plunged 23% after the homebuilder reduced its annual profit outlook by £80 million, dragging the household goods and home construction sector down by 4.2%. Other homebuilders, including Crest Nicholson, Bellway, Persimmon, and Taylor Wimpey, also saw declines between 1.1% and 6.5%.

Imperial Brands rose 4.1%, topping the FTSE 100 after forecasting significant revenue growth in its next-generation products and announcing plans for shareholder returns worth £2.8 billion.

Across the Atlantic, the S&P 500 rebounded 0.97% and the Nasdaq rose 1.45%, recouping some of the losses from Monday’s sell-off. Tech stocks drove the recovery, with Nvidia leading the charge, up 4.1%. Other tech giants like Apple, Tesla, and Meta Platforms saw gains between 1.4% and 1.8%. Palantir Technologies surged 6.6%, and Palo Alto Networks jumped 5.1%, contributing to a 2.1% rise in the information technology sector.

US-listed Chinese firms such as Alibaba, JD.com, and PDD Holdings dropped between 5.4% and 7.5%, following losses in Chinese stocks. Energy stocks also suffered, with the energy sector slipping 2.6%, its largest one-day loss since August, as oil prices retreated. Despite PepsiCo trimming its annual sales growth forecast, the company’s shares rose 1.9% after it reported better-than-expected adjusted earnings per share.

As earnings season approaches, investors will be watching closely for updates, with major US banks set to report on Friday, adding further intrigue to market movements.

Forex & Commodities

The US dollar held steady on Tuesday, just below its seven-week high, as traders awaited key US inflation data and the minutes from the Federal Reserve's September meeting.

The euro hovered at $1.0971, near its recent low, while the pound edged slightly higher to $1.3085. Investors are focused on Thursday’s Consumer Price Index report, which will provide insights into the Fed's next move. Currently, markets are pricing in an 87% chance of a 25-basis-point interest rate cut in November.

Gold prices remained flat at $2,620.50 per ounce after a recent two-week low, with traders cautious ahead of the Fed minutes and inflation data. Analysts suggest that a softer CPI report could give gold a boost, but any significant gains depend on broader US economic data underperforming. Meanwhile, US Treasury yields stayed above 4%, keeping the dollar strong against major currencies.

In the oil markets, Brent crude rose 0.6% to $77.63 a barrel, while US West Texas Intermediate climbed to $73.90. This modest recovery followed a steep 4% decline on Tuesday amid ceasefire speculation in the Middle East. Investors are also eyeing potential fiscal stimulus announcements from China, which could drive up demand. However, weaker US and Chinese manufacturing data have tempered expectations for global oil demand growth.