A US inflation reading later in the day was proving too big of a risk event for markets to trade decisively early Thursday, leaving stock prices to drift mostly lower.
The data could help shape Federal Reserve policy between now and the end of the year. A high inflation reading would all but guarantee the US central bank implements another hefty rate hike.
The Fed itself acknowledged that a 75 basis point hike next month is likely, minutes from its September meeting showed on Wednesday.
The FTSE 100 index fell 31.98 points, or 0.5%, to 6,794.17. The FTSE 250, however, added 15.57 points, or 0.1%, to 16,626.73. The AIM All-Share fell 0.74 of a point, 0.1%, at 775.53.
The Cboe UK 100 opened down 0.3% at 679.81, the Cboe UK 250 edged down 0.1% at 14,211.51, and the Cboe Small Companies traded 0.1% lower at 12,291.45.
In European equities on Thursday morning, both the DAX 40 in Frankfurt and the CAC 40 in Paris were down 0.1%.
In Asia, Tokyo's Nikkei 225 ended 0.6% lower. The Shanghai Composite ended 0.3% lower, while the Hang Seng in Hong Kong was down 1.7% in late trade. The S&P/ASX 200 in Sydney fell 0.1%.
Fed policymakers are likely to press on with rate hikes in the short term, but the pace of hikes might slow after December, according to the minutes from the September meeting of the Federal Open Market Committee. Members said slower gross domestic product growth and a ‘softening’ of the jobs market would be needed to get a handle on inflation. Inflation had shown ‘little sign so far of abating’ so far, they thought.
‘The market-implied path suggested reasonable odds of additional 75 basis point and 50 basis point rate increases at the November and December meetings, respectively. Market participants generally anticipated a further slowing in the pace of rate increases after December, with the peak policy rate being reached in the first half of 2023,’ the minutes read.
Annual US inflation is expected to have slowed to 8.1% in September from 8.3% in August. August's figure had come in ahead of consensus of 8.1%, however, adding to concerns about a beat to expectations in September.
The data is released at 1330 BST, alongside the latest initial jobless claims report.
Eyes also remain on monetary and fiscal policy developments in the UK.
As the Bank of England's self-imposed deadline for the end of its emergency bond buying programme nears, the pound was flat. Sterling traded at $1.1064 shortly after the equities open, unchanged from $1.1066 at the time of London market close on Wednesday.
The yield on the 30-year UK government gilt stood at 4.76% around 0830 BST, narrowing from 4.81% around 1700 BST on Wednesday.
It had spiked above 5% on Wednesday, after the BoE confirmed it would end its emergency gilt buying scheme on Friday, despite market hopes it would be extended.
UK Prime Minister Liz Truss was under fire from her own members of Parliament as they demanded more U-turns on her tax-slashing agenda after she ruled out spending cuts to balance the books.
The PM's leadership was in renewed peril as she was accused of ‘trashing the last 10 years’ of the Tories' record at a bruising meeting with backbenchers.
MPs piled pressure on her to restore market confidence in her government, with reports suggesting she is facing mounting calls to reverse or delay her plan to cancel a rise in corporation tax from 19% to 25%, due in April.
The euro stood at $0.9688 early Thursday, down from $0.9702 late Wednesday. Against the yen, the dollar was trading at JP¥146.80, lower from JP¥146.90.
In London, Taylor Wimpey shares were down 4.6%. It went ex-dividend, meaning shareholders will no longer qualify for the latest payout.
There are also continued worries about a slowdown in the UK housing market.
‘Storm clouds are visible’, according to surveyors, with surging mortgage rates expected to push house prices downwards in the year ahead. The market lost momentum in September, with new buyer inquiries falling for the fifth month in a row, the Royal Institution of Chartered Surveyors said.
Entain rose 1.3%. The gambling operator backed annual guidance as it looks to a final quarter boosted by the football World Cup.
In the third quarter of 2022, net gaming revenue rose 2%, but was flat at constant currency. Online net gaming revenue was up 1%, or down 2% at constant currency, an outturn Entain largely expected.
Looking ahead, Entain's fourth quarter will benefit from the World Cup, as well as easier comparatives due to Covid-19 and the temporary closure of its Dutch arm.
Annual earnings before interest, tax, depreciation and amortisation are expected to be in line with previous £925 million to £975 million guidance, growth of as much as 10% from 2021.
Rank Group lost 8.8%. The Grosvenor casinos owner kicked off its financial year with a revenue hike, though it faces weakening consumer confidence and rising inflationary pressures.
In the three months to September 30, group net gaming revenue rose 2% year-on-year on a like-for-like basis to £165.7 million. At Grosvenor alone, it was a 5% decline.
‘Grosvenor venues saw visits grow in the quarter, however, with lower spend per visit,’ Rank explained. It expects consumer spending to remain under ‘significant pressure’.
‘Other inflationary pressures continue to present an increasing challenge to the group, particularly in our venues businesses, with wage inflation, food input price increases and supply chain pressures all pushing up costs. FY23 costs will also be higher due to the non-recurring government support of rates relief and furlough payments received in the first quarter of the prior financial year. We continue to focus on initiatives that mitigate these cost pressures as much as possible,’ Rank said.
Russell Pointon at research house Edison commented: ‘In the venues there is a consistent message of higher visitor numbers but lower spend. In the prior update, management highlighted the benefit to Grosvenor from tourism in London, likely to have benefited from weak sterling, and this appears to have continued, but elsewhere was weak.’
Zotefoams surged 15%. The lightweight foams make said revenue in the third quarter of 2022 was up 27% year-on-year.
‘Encouragingly, the group continues to benefit from its broad customer diversification and has seen continued resilient demand across most of its end market segments. Both revenues and margins are also seeing an increasing benefit from pricing actions implemented earlier in the year, in response to cost inflation, as well as from a weaker sterling exchange rate, primarily against the US dollar,’ it said.
It now expects adjusted pretax profit to be ‘significantly ahead’ of market expectations, which currently stand at £9.3 million.
A barrel of Brent oil was quoted at $92.96 early Thursday, up from $92.55 late Wednesday. Gold was quoted at $1,668.56 an ounce, down from $1,670.16.
Still to come on the economic calendar is Irish inflation data at 1100 BST.
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