US open: Stocks slide as China suspends trading, oil prices tumble

US stocks on Thursday continued to slide as China halted trading, oil prices plunged and geopolitical tensions escalated.

The Dow Jones Industrial Average fell 1.80%, the Nasdaq dropped 2.10% and the S&P 500 decreased 1.67% at 1436 GMT.

Global equities ruptured after trading was suspended in mainland China following a 7% fall in the CSI 300 index. It triggered the nation’s ‘circuit breaker’ rule, designed to stop panic selling, and came after 30 minutes to mark the shortest trading day on record.

Shares in China tumbled after the People’s Bank of China allowed the biggest fall in the yuan in five months on Thursday. The central bank set the official midpoint rate on the yuan 0.5% weaker at 6.5646 per dollar, the lowest since March 2011.

“Market participants in general are remaining very jittery, with the concerns over China, increased geo-political tensions elsewhere, depressed commodity markets and anxiety over the general pace of growth in the global economy encouraging investors to scatter away from riskier assets,” said FXTM Research Analyst Lukman Otunuga.

The World Bank cut its outlook for Chinese growth in 2016 to 6.7% from 7% in June and said it now expects Brazil and China’s economies to contract 2.5% and 0.7%, respectively. The Bank also slashed its global economic growth forecast for this year to 2.9% from a 3.3% estimate in June, pointing to weak growth in major emerging markets.

Meanwhile, oil prices hit new lows with West Texas Intermediate down 3.3% to $32.88 per barrel and Brent crude down 2.9% to $33.24 per barrel at 1418 GMT.

“Oil reserves are at record levels around the world, so with a previously guzzling China beginning to choke it’s little surprise we’re now seeing the cost of a barrel at an 11-year low,” said Dennis de Jong, managing director at UFX.com.

Rising tensions between Iran and Saudi Arabia also dashed hopes that OPEC members may agree on a production cut.

In the latest row between two, Iran has accused Saudi Arabia of launching an air strike on its embassy in the Yemini capital of Sana’a.

An unexpected nuclear test in North Korea has also added to geopolitical worries this week.

In the US, the Federal Reserve’s minutes of its 15-16 policy meeting on Wednesday showed that members of the central bank expressed concerns about low inflation before deciding unanimously to raise interest rates for the first time in a decade. The Fed is targeting inflation of 2%.

Policymakers also believed the strength of the US dollar and slow growth could restrain the Fed’s plans for gradual rate increases in 2016.

Richmond Fed’s Jeffrey M. Lacker tried to soothe concerns on Thursday by saying that inflation was likely to move back towards the Fed’s target in the near term.

"After the price of oil bottoms out, I would expect to see headline inflation move significantly higher," Lacker said in a speech to the Chamber of Commerce in Raleigh.

Fed policymaker Charles Evans is due to speak at 1915 GMT on the economy and monetary policy in Madison.

Elsewhere, US initial weekly unemployment claims fell by 10,000 over the week to 2 January to 277,000, according to the US Department of Labor. Economists had pencilled in a slightly larger drop to 275,000. The reading for the previous week was unrevised at 278,000.

The report comes ahead of Friday’s all-important non-farm payrolls report.

In company news, Yahoo fell on the back on a report from Business Insider that it plans to cut at least 10% of its staff to curb costs.

Apple also took a hit, down just under 3% as questions are asked about reports that iPhone 6S and 6S Plus production levels are being cut. UBS on Thursday reportedly moved to lower its forecast for smartphone sales.

Macy’s advanced after the major US retailer outlined plans to cut $400m in annual costs through store closures and thousands of job cuts.

The dollar was up against the pound, rising 0.37%, while it dropped 0.64% against the euro and 0.51% against the yen. Spot gold was up 0.95% to $1,104.02.