London stocks were set to nudge lower at the open on Wednesday as investors eye the latest policy announcement from the US Federal Reserve.
The FTSE 100 was called to open seven points lower at 7,267.
CMC Markets analyst Michael Hewson said: “Today’s Fed meeting is widely expected to see the central bank layout a timetable to start the tapering of its asset purchase program, against a backdrop of surging energy prices, as well as factory gate prices which are at multi-year highs.
“There does appear to be a growing recognition amongst a rising number of Fed officials that inflation is likely to be much more persistent than was previously envisaged, It is clear that the Fed’s narrative for acting has shifted away from the labour market, and there is a wider acknowledgement about rising inflation risk, however once the taper timetable has been outlined Fed officials will then come under increasing pressure to outline a timetable for an increase in interest rates, a move that Fed Chair Jay Powell has already indicated is not imminent and could be as long as a year away.”
Hewson said that once the taper starts, the maths is likely to shift as the data evolves, which means that a rate hike for 2022 could well become a majority view by the end of this year. This would be a significant shift in thinking from earlier this year, he added.
On home shores, Markit’s services purchasing managers’ index for October is due at 0930 GMT.
In corporate news, fashion retailer Next has reported better-than-expected full-price sales in the last five weeks, but warned that momentum would slow in the final quarter due to diminishing pent-up demand from Covid lockdowns and supply-chain constraints.
The company said sales were up 14% compared with forecasts of 10% since its last update in September and maintained its annual pre-tax profit guidance of £800m.
