The FTSE 100 is expected to open around 21 points, or 0.2%, lower at 10,520.59 on Wednesday, after closing 43.75 points, or 0.4%, higher at 10,541.69 on Tuesday.
Sentiment has shifted as global government bond yields move higher again, reversing some of the easing that supported equities in the previous session.
The US 10-year Treasury yield climbed back to around 5.32%, compared with 5.27% at Tuesday’s London close, while the 30-year yield increased to approximately 5.69%.
Bond markets are increasingly focused on whether investors are willing to absorb large amounts of US government debt at current yields.
The Treasury is scheduled to auction $39 billion of 10-year notes on Wednesday, following a $58 billion three-year sale on Tuesday. Recent Treasury auctions have attracted heightened scrutiny after weak demand contributed to sharp increases in longer-term yields.
Wall Street finished higher on Tuesday, with the Dow gaining around 0.5%, the S&P 500 rising 0.6% and the Nasdaq advancing around 0.5%, with both the S&P 500 and Nasdaq reaching fresh record highs.
Japan’s Nikkei 225 fell around 0.6%, while Hong Kong’s Hang Seng also declined approximately 0.6%. Australian equities were marginally weaker, while mainland Chinese markets remained closed.
The more cautious tone coincided with renewed strength in the dollar and higher bond yields.
Sterling weakened to around $1.3247, while the euro slipped to approximately $1.1228 and the dollar strengthened to around ¥158.41.
Brent crude rebounded above $101 a barrel, after falling below $100 during the previous session.
Reuters reported Brent around $101.6 a barrel, with prices supported by both renewed Middle East security concerns and the threat of disruption to US Gulf of Mexico oil production from a developing storm.
The Gulf of Mexico storm is potentially significant because offshore facilities in its projected path account for around 15% of US crude production and 5% of natural-gas output.
Reuters reported that Saudi-led forces intercepted a Houthi ballistic missile north of Riyadh, while Houthi military spokesperson Yahya Saree separately claimed attacks on Saudi airports including King Khalid International Airport. Saudi authorities had not confirmed all of those claims at the time of reporting.
The renewed rise in crude comes despite the recent improvement in Middle Eastern oil exports, leaving markets caught between stronger physical supply and continuing geopolitical and logistical risks.
Gold eased to around $4,136 an ounce, as rising yields and a firmer dollar reduced some demand for the non-yielding precious metal.
For London investors, Wednesday’s corporate calendar includes a trading update from Shell, while the economic calendar features German industrial production, UK house-price data, US consumer inflation expectations and minutes from the Federal Reserve’s September meeting.
The immediate market risk has therefore shifted back towards the same combination that unsettled equities last week: oil above $100 and long-term US Treasury yields above 5%.
The US 10-year auction will be particularly important. Strong demand could help stabilise yields, while another weak debt sale could reinforce concerns that investors require an increasingly large premium to finance US government borrowing and put renewed pressure on global equity valuations.
Investor takeaway: The FTSE 100 is expected to open around 0.2% lower as US Treasury yields push higher again and Brent crude rebounds above $100 a barrel. Tuesday’s relief from softer oil and falling bond yields is therefore proving short-lived, with investors now focused on a key US 10-year Treasury auction and renewed Middle East supply risks.
