Sharecast - London's FTSE 100 was down 0.4% at 7,698 by 0850 BST, pulling back after finishing at 7,731.65 on Wednesday – its highest close since 23 May.
Eyes on BoE after hawkish tone set by Fed
The closely watched Federal Open Market Committee meeting drew to a close after the end of the previous trading session in London, with policymakers deciding to keep interest rates unchanged from the 5.25-5.5% range, as was widely expected by the market. This was the second time this year where its rate-hiking cycle has been paused.
However, 12 of the 19 voting FOMC members said they expect to raise rates once more this year, at one of the two remaining meetings in November or December. Furthermore, looking further forward, the committee indicated that interest rates would only be lowered to around 5% by the end of 2024, indicating that they remain committed to a 'higher-for-longer' strategy.
At a press conference following the meeting, chair Jerome Powell said he still needed to see "convincing evidence" that higher interest rates are having the desired effect on inflation before the FOMC can begin to loosen monetary policy.
The comments, which dragged US stock markets into the red, will likely have worried UK investors ahead of the BoE's own Monetary Policy Committee meeting, given recent optimism that any potential interest-rate hike today will be the last in the central bank's current cycle.
However, a surprise drop in inflation figures reported on Wednesday has "reshaped market opinion somewhat with the odds of a pause now about 50/50," said Neil Wilson from Markets.com. Wilson pointed that the market pricing had been about 80% in favour of a interest-rate hike of 25 basis points to 5.5% before the consumer price index was released.
"The deceleration in headline inflation to an 18-month low will clearly create debate about the need for a hike today. But I would argue that, with inflation still three times where it should be, the risk for the BoE is in doing too little and needing to restart tightening," he said/
JD and Next lead retailers higher
UK sportswear retailer JD Sports Fashion was a standout performer early on after reporting it was still on track to deliver a 5% rise in annual profit. First-half earnings rose by more than a quarter driven by strong sales despite the cost-of-living crisis.
High street peer Next also impressed as it lifted full-year guidance for the third time in four months after better-than-expected summer sales. Pre-tax profits are now forecast to come at £875m from previous guidance of £845m.
Dunelm (LON:DNLM) was also rebounding after disappointing the market on Wednesday with its full-year results, in which pre-tax profits fell 8%.
However, sector peer Ocado (LON:OCDO) was under intense selling pressure as investors took profits after share-price gains earlier in the week after a solid third-quarter trading update.
Safety equipment group Halma (LON:HLMA) was lower despite saying it expects deliver good underlying growth in the first half, as it maintained full-year guidance.
Stocks in the heavyweight financial and mining sectors were weighing on markets early on with Barclays (LON:BARC), Prudential (LON:PRU), Antofagasta (LON:ANTO), Glencore (LON:GLEN) and Fresnillo (LON:FRES) registering declines.
Outsourcing group Capita rose after signing two new contracts with the UK and Northern Ireland governments worth a combined £565m.
Hospitality conglomerate SSP Group dropped despite revealing that it would deliver annual revenues and profits at the "upper end of the ranges previously indicated".
Market Movers
FTSE 100 (UKX) 7,697.51 -0.44%
FTSE 250 (MCX) 18,632.93 -0.42%
techMARK (TASX) 4,393.50 -0.28%
FTSE 100 - Risers
JD Sports Fashion (JD.) 143.05p 6.69%
Next (NXT) 7,260.00p 2.28%
Marks & Spencer Group (MKS (LON:MKS)) 233.30p 0.95%
Auto Trader Group (AUTO) 630.80p 0.83%
AstraZeneca (NASDAQ:AZN) 11,034.00p 0.77%
Land Securities Group (LAND (LON:LAND)) 608.80p 0.69%
Admiral Group (LON:ADML) (ADM) 2,438.00p 0.66%
GSK (GSK) 1,544.20p 0.59%
Kingfisher (LON:KGF) 216.90p 0.56%
Beazley (BEZ) 575.50p 0.52%
FTSE 100 - Fallers
Ocado Group (OCDO) 756.00p -6.48%
Entain (LON:ENT) 1,082.00p -2.48%
Flutter Entertainment (CDI) (FLTR) 14,215.00p -2.12%
Barclays (BARC) 156.08p -1.87%
Prudential (PRU) 907.40p -1.80%
Antofagasta (ANTO) 1,428.00p -1.55%
Halma (HLMA) 2,045.00p -1.45%
Glencore (GLEN) 456.40p -1.44%
Fresnillo (FRES) 584.00p -1.42%
Melrose Industries (LON:MRON) (MRO) 479.20p -1.40%
FTSE 250 - Risers
Dunelm Group (DNLM) 1,076.00p 1.51%
Close Brothers Group (CBG) 876.50p 1.15%
Keller Group (LON:KLR) 789.00p 1.15%
Bridgepoint Group (Reg S) (BPT) 199.20p 1.12%
Currys (CURY) 49.68p 0.85%
Hays (LON:HAYS) (HAS) 108.60p 0.74%
Redde Northgate (REDD) 339.50p 0.74%
IP Group (LON:IPO) 60.70p 0.66%
Octopus Renewables Infrastructure Trust (ORIT) 91.30p 0.66%
Lancashire Holdings Limited (LRE) 624.00p 0.65%
FTSE 250 - Fallers
SSP Group (SSPG) 229.80p -6.05%
IG Group Holdings (LON:IGG) 638.00p -4.92%
Redrow (LON:RDW) 490.40p -4.22%
Crest Nicholson Holdings (LON:CRST) 183.20p -3.98%
Carnival (NYSE:CCL) 1,053.50p -3.70%
Ceres Power Holdings (LON:CWR) 373.40p -2.96%
FDM Group (Holdings) (LON:FDM) 519.00p -2.44%
Bank of Georgia Group (LON:BGEO) 3,655.00p -2.04%
TUI (LON:TUIT) AG Reg Shs (DI) (TUI) 490.00p -1.84%
Harbour Energy (LON:HBR) 252.20p -1.83%