The FTSE 100 is expected to open around 20 points, or 0.2%, lower at 10,678.57 on Tuesday, giving back some of Monday’s 0.4% gain as investors weigh rising bond yields, US interest-rate expectations and continued AI-sector volatility.
Pressure on global markets increased as the US 10-year Treasury yield climbed above 5% to 5.02%, reaching its highest level since 2007 ahead of Wednesday’s Federal Reserve decision.
Markets are now pricing in almost a full 25 basis-point US rate increase, with Rabobank saying overnight index swaps imply traders see a hike this week as nearly certain.
Wall Street closed lower on Monday as concerns over a potential slowdown in AI development hit semiconductor stocks. The Dow Jones fell 0.3%, the S&P 500 lost 0.5%, and the Nasdaq Composite declined 0.6%, while the Philadelphia Semiconductor Index dropped almost 6%.
Asian markets were also mostly weaker, with the Nikkei 225 down 0.2%, Hong Kong’s Hang Seng falling 0.7% and Australia’s S&P/ASX 200 losing 1.0%. SoftBank rebounded 7.9% in Tokyo after falling 11% on Monday.
China reported mixed economic data, with August retail sales rising just 0.4% year-on-year, below expectations, while industrial production increased 5.2%.
UK investors will focus on labour market data this morning, with the unemployment rate expected to rise to 5.0% from 4.9%.
In commodities, Brent crude eased to $107.40 a barrel, although Middle East tensions remain elevated following renewed Houthi attacks involving missiles and drones. Gold edged higher to around $4,293 an ounce.
