Leading shares have paused for breath after yesterday's gains, and despite a surge in US markets and a positive performance in Asia.
Ahead of the speech from prime minister Liz Truss at the Tory party conference and the latest UK service sector report, the FTSE 100 is down 43.47 points or 0.61% at 7042.99.
On Truss, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: "She is expected to brush away concerns about market volatility and double down on her promises that her policies will lead to growth.
"She’s facing an uphill struggle though to convince her colleagues that reductions in public spending, which will be necessary to fund tax cuts, won’t end up denting productivity over the longer term instead, especially if working families are made poorer."
Investors are also cautious about whether the US Federal Reserve may indeed ease off a little on its path of ever higher interest rates to curb inflation. Some recent data, including job openings yesterday, suggested to some analysts that the Fed might not need to be as hawkish as previously thought.
Streeter said: "Investors are clinging onto every shred of evidence which may point in this direction, such as US job vacancy stats which dropped sharply in September. But there is still every chance that the rays of light they are glimpsing will be eclipsed by a fresh determination by policymakers to stay the course on rate rises until inflation is brought down considerably further. Rather than a quick Fed pivot, it’s more likely to be a slow a gradual turn in policy, particularly if the US core inflation rate, remains stubbornly elevated around 6.3% at the temperature check next week."
Central banks are still generally in rate rise mode, with New Zealand lifting rates to a seven year high, up 50 basis points to 3.5%.
Tesco PLC (LON:TSCO) is up around 1% even though the supermarket group said profits were likely to be at the lower end of its expected range due to the cost of living crisis and rising costs.
It said: "Despite ongoing challenges in the market, we are able to maintain our profit guidance within our previous range, albeit towards the lower end.
"We therefore expect full year retail adjusted operating profit of between £2.4bn and £2.5bn. Significant uncertainties in the external environment still exist, most notably how consumer behaviour continues to evolve."
7.00am: FTSE 100 set to open lower
FTSE 100 set to make a weaker start on Wednesday, after strong gains yesterday, with UK Prime Minister Liz Truss set to deliver her keynote conference speech, and oil-producing nations meet to discuss their production strategy.
Spread betting companies are calling London’s blue-chip index down by around 23 points.
US markets enjoyed a second consecutive day of strong gains as weaker than expected US job postings gave investors hope that the Federal Reserve may take its foot of the accelerator with regard to the pace of future interest rate increases.
At the close the Dow Jones Industrial Average had stormed 825 points higher, or 2.8%, to 30,316, the S&P 500 had advanced 113 points, or 3.06%, to 3,791 and the Nasdaq Composite soared 361 points, or 3.34%, to 11,176.
In London, results from Tesco will lead the corporate news agenda.