US Chip Stocks Slide on China’s CXMT Progress

Summary

US chip stocks slid sharply on reports of rapid tech progress by Chinese memory maker CXMT, sparking a rout in AI stocks. South Korea’s KOSPI plunged to its lowest since late July. European futures pointed lower, with luxury stocks in focus after LVMH reported weaker-than-expected third-quarter sales on soft Chinese demand. Brent hovered near $106 as the Middle East conflict widened, while Treasuries drew some safe-haven demand.

Equities

The FTSE 100 closed almost 1% higher at 10,656.28 on Monday, lifted by banks and medical equipment stocks, while the FTSE 250 added 0.47%. Investors are looking ahead to US inflation figures on Wednesday and UK GDP data on Thursday.

HSBC, Lloyds Banking Group, Barclays, NatWest, Standard Chartered and Standard Life closed between 1.7% and 2.3% higher on Monday. Medical equipment and services shares rose 2.75%.

Burberry rose 1.9% on Monday after Frasers Group lifted its stake in the luxury brand to 7.42% from 6.32%. SSP Group, owner of Upper Crust, fell 2.2% on Monday after Berenberg cut its price target.

Chancellor John Healey attends the International Monetary Fund’s annual meetings this week. He faces higher borrowing costs and an estimated £36bn fiscal gap ahead of his first Budget on 28 October.

On Wall Street, the Dow Jones Industrial Average rose 0.38% to 51,850.55 on Monday, while the S&P 500 slipped 0.06% to 7,807.24 and the Nasdaq Composite fell 0.44% to 27,245.90. Oil prices jumped almost $2 a barrel after weekend strikes on Riyadh’s international airport, lifting energy shares 1.5%.

Chip stocks weighed on the Nasdaq, with the Philadelphia semiconductor index closing 2.7% lower on Monday after hitting a three-week low.

Chipotle Mexican Grill fell 3.8% on Monday after Starbucks said it was not buying the burrito chain, while Starbucks closed 1.7% higher. Meta closed more than 3% higher, and Microsoft rose 1.1%, lifting its market value above $4trn for the first time in a year after it announced plans to deploy its own AI chips at scale.

Salesforce added 2% on Monday after BofA Global Research upgraded the stock to buy from underperform, and eBay also rose 2% after Morgan Stanley named it a top pick.

Cleveland Fed President Beth Hammack said policy should become more restrictive relatively quickly to tackle inflation. Traders now price in an almost 22% chance of a rate rise this month, up from 17.7% on Friday. Goldman Sachs, Citigroup and JPMorgan Chase report third-quarter results early on Tuesday.

Forex & Commodities

The dollar slipped early on Tuesday as oil prices and US Treasury yields eased, with the dollar index down at 102.4. The euro rose to $1.118, while sterling edged up to $1.322.

The yen strengthened to 158.2 per dollar after Bank of Japan data showed wholesale prices rose 6.8% in the year to September, below the 7.6% forecast. The offshore yuan held steady at 6.696, close to its strongest level in four years.

The Australian dollar was flat at $0.6960 after minutes from the Reserve Bank of Australia’s September meeting confirmed a unanimous vote for a fourth rate rise this year. The central bank left the door open to a fifth hike if inflation proves stubborn.

The yield on the 10-year US Treasury fell 5 basis points to 5.192% early on Tuesday as trading resumed after Monday’s holiday. Cleveland Fed President Beth Hammack called for a swift move to more restrictive policy. Markets are pricing a 19% chance of an October rate hike and an 85% chance of a hike in December.

US consumer price data is due on Wednesday, followed by producer prices on Thursday. In the UK, grocery price inflation rose to 2.5% over the four weeks to 4 October, adding to pressure from higher fuel and energy bills.

Spot gold rose 0.4% to $4,188 an ounce early on Tuesday after reaching a one-week high on Monday. Silver gained 0.2% to $60.46, platinum rose 0.5% to $1,695 and palladium slipped 0.2% to $1,141.

Oil fell early on Tuesday and was on course for its first decline in nearly a week. Brent was down 1.1% at $105.5 a barrel, while WTI fell 1.3% to $92.57.

US President Donald Trump said Russia had agreed to supply diesel to global markets, and Washington temporarily lifted sanctions on Russian fuel. Saudi Arabia reported fresh incoming fire following a deadly Houthi missile strike on Riyadh airport at the weekend. OPEC cut its oil demand growth forecast for this year to 400,000 barrels per day, down from 1.4 million.

Chip stocks sold off sharply on Tuesday on worries that rising interest rates could curb AI spending. LVMH shares were indicated lower as weakness in China weighed on sales.