FTSE 100 futures indicated an opening around 45 points, or 0.4%, lower at 10,561.40 on Thursday, extending Wednesday’s 0.3% decline.
The softer tone comes despite US inflation data reducing expectations for another immediate Federal Reserve rate increase.
US core PCE inflation rose 0.2% month-on-month and 3.0% year-on-year in August, below market expectations, helping reduce the implied probability of an October Fed increase to around 38%.
That relief was insufficient to reverse pressure from longer-dated bonds. The US 10-year Treasury yield reached 5.306%, its highest since June 2007, after one of the sharpest quarterly bond-market sell-offs in decades.
Wall Street ultimately gave back much of its earlier advance on Wednesday. The Dow fell 0.9% and the S&P 500 lost 0.3%, while the Nasdaq gained 0.2%, supported by technology shares.
Asian markets were mixed. Japan’s Nikkei 225 jumped more than 3%, driven by semiconductor stocks after strong results from US memory-chip maker Micron, while Australian equities fell sharply and mainland Chinese markets remained closed for a holiday.
Oil prices provided another major change in the market backdrop. Brent crude fell around 1.4% to $96.64 a barrel, as recovering Gulf exports, higher US inventories and reduced immediate supply fears pushed prices lower.
For the FTSE 100, cheaper crude has a mixed impact. It reduces inflation pressure and benefits fuel-intensive businesses, but could weigh on BP and Shell, whose large index weight means weakness in energy can drag on the wider benchmark.
Gold remained supported at around $4,200 an ounce, while sterling eased to approximately $1.325 against the dollar.
Thursday’s UK focus turns to September manufacturing PMI data, alongside Nationwide house-price figures, while US initial jobless claims will provide another indication of labour-market strength.
For investors, the key tension is that short-term Fed expectations are easing but long-term yields remain stubbornly high. Until Treasury yields begin falling materially, softer inflation alone may not be enough to deliver a sustained equity-market rebound.
