Broader concerns about China’s economic stability resurfaced, with the Shenzhen Index plunging 8.7%, marking its worst day since 1997, and the Shanghai Composite dropping 6.6%. The sell-off in Chinese equities also affected major U.S.-listed ETFs, with the iShares China Large-Cap ETF sliding 2.3%.
Focus on Economic Data and Fed Minutes
Investors awaited the release of the Federal Reserve’s September meeting minutes, scheduled for 18:00 GMT. These minutes, along with upcoming inflation data, will provide further insights into the Fed’s policy outlook. Market participants are keen to assess whether last week’s robust labor market data strengthens the case for another interest rate hike. Oil prices have retreated recently, providing relief to inflation expectations and fueling optimism that the Fed may be nearing the end of its tightening cycle.
Market Outlook: Cautious Tone Ahead of Earnings Season
While the broader market trend remains slightly upward, volatility could persist as traders digest upcoming economic data and corporate earnings. Historically, October is a volatile month, and with earnings season set to kick off Friday with reports from major banks, further fluctuations are likely.
Short-term risks include heightened volatility from geopolitical factors and renewed concerns about high stock valuations. However, a continuation of favorable economic data could lend support to equities, particularly in sectors with robust earnings growth potential.
Given these factors, a cautious but slightly bullish outlook may be warranted, with potential gains driven by tech and financial sectors if earnings results meet expectations.