LONDON MARKET EARLY CALL: FTSE 100 seen up as gilt turmoil eases

(Alliance News) - Stocks in London are set to open higher on Wednesday, as investors continue to digest the fallout from political turmoil in Westminster and elevated US inflation.

IG says futures indicate the FTSE 100 to open 57.8 points higher, 0.6%, at 10,323.12 on Wednesday. The index of London large-caps closed marginally lower at 10,265.32 on Tuesday.

Gilts will remain in focus after UK borrowing costs surged on Tuesday, as a leadership crisis surrounding Prime Minister Keir Starmer rattled bond markets.

The 30-year gilt yield held at its highest level this century, with cabinet ministers piling pressure on Starmer to consider his position. Benchmark 10-year gilt yields hit their highest level since 2008, rising 0.13 percentage points to an intraday high of 5.13%, before easing back to 5.103% at the close.

Starmer was fighting to stay in office on Tuesday after openly challenging his rivals to launch a Labour leadership bid, as ministers resigned and calls for him to step down grew louder.

Starmer's supporters believe he has headed off a possible challenge by Health Secretary Wes Streeting, who is not thought to have the backing of the 81 Labour MPs required to formally launch a leadership bid. The prime minister is due to hold a crunch meeting with Streeting after challenging rivals to test their support.

Starmer told his cabinet on Tuesday to get on with their jobs ahead of Wednesday's state opening of parliament, when King Charles will unveil dozens of pieces of legislation aimed at demonstrating that the government still has a plan for the UK.

Sterling was quoted at USD1.3544 early Wednesday, higher than USD1.3505 at the London equities close on Tuesday. Against the euro, sterling rose to EUR1.1543 from EUR1.1517 a day prior.

The euro traded at USD1.1733 early Wednesday, slightly higher than USD1.1729 late Tuesday. Against the yen, the dollar was quoted at JPY157.71 versus JPY157.73.

In the US on Tuesday, Wall Street ended mixed. The Dow Jones Industrial Average rose 0.1%, the S&P 500 fell 0.2% and the Nasdaq Composite declined 0.7%.

Another major focus for markets was US inflation. President Donald Trump insisted his policies were working and argued that surging US inflation was only temporary, driven by the US and Israeli war against Iran.

"Our inflation is just short term," Trump told reporters, hours after consumer price inflation came in at 3.8% year-on-year, its highest level in three years. "As soon as this war is over, which will not be long, you're going to see oil prices drop," he said.

Asked whether Americans' financial situation was motivating him to strike a peace deal with Iran, Trump replied: "Not even a little bit. The only thing that matters when I'm talking about Iran: they can't have a nuclear weapon."

Attention now turns to Trump's trip to China, where he is due to arrive in Beijing on Wednesday evening for the first visit by a US president in nearly a decade.

The high-stakes summit with Chinese President Xi Jinping comes as the war in Iran looms over talks. Trump is expected to be accompanied by prominent tech leaders including Elon Musk and Tim Cook, with trade, artificial intelligence and Taiwan all on the agenda.

Trump said he expected a "long talk" with Xi about Iran, which relies on China as the top customer for its US-sanctioned oil. However, he downplayed disagreements, saying Xi had been "relatively good, to be honest with you". Trump added that he would ask the Chinese president to "open up" China to US businesses.

Brent oil was trading at USD106.12 a barrel early Wednesday, lower than USD108.07 late Tuesday.

In Asia on Wednesday, the Nikkei 225 index in Tokyo rose 0.8%. In China, the Shanghai Composite gained 0.4%, while the Hang Seng index in Hong Kong was marginally lower. The S&P/ASX 200 in Sydney fell 0.4%.

Gold was quoted at USD4,699.97 an ounce early Wednesday, higher than USD4,663.87 on Tuesday.

In Wednesday's corporate calendar, Amaroq Ltd reports first-quarter results, Avon Technologies posts half-year results, Conduit Holdings issues a trading statement, Spirax Group releases a trading statement and TP ICAP Group also provides a trading update.

On the economic calendar, the eurozone releases GDP, industrial production and employment change data. France reports unemployment and consumer price inflation, while Germany publishes current account and wholesale price figures.

In the UK, the King's Speech is due. In the US, producer price inflation, EIA crude oil stocks and the IEA oil market report are scheduled.

By Eva Castanedo, Alliance News reporter

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