London pre-open: Stock futures lower ahead of FOMC as UK inflation holds steady

(Sharecast News) - London's blue chip index was expected to open marginally lower on Wednesday after hitting a three-week high the previous session, as oil prices stabilised and risk appetite waned ahead of the some crucial central bank meetings.

By 0712 BST, the FTSE 100 was being called to open around 0.1% lower after settling at 10,494.2 on Tuesday, its highest level since 27 May.

In economic data released early on, the annual rate of UK inflation held steady at 2.8% in May, according to the Office for National Statistics, surprising economists who had pencilled in a rise to 3.0%. The headline rate stayed at its lowest since March 2025, though core inflation edged higher to 2.6% from 2.5%.

Crude prices have collapsed since last Friday following the announcement of a peace deal struck between the US and Iran, with Brent dropping from the $90-a-barrel before the weekend to $78.96 on Tuesday evening. That was the lowest settlement price since early March when the conflict between the two nations began.

However, there remains a high degree of uncertainty regarding the deal, with many details still unknown. Comments from US negotiators on Tuesday suggest that a number of issues remain. Brent was up 0.05% at $79.00 a barrel in early deals.

Central banks are back in focus last week, following a rate hike by the Bank of Japan and no change by the Reserve Bank of Australia on Tuesday, with key decisions in the US and UK still ahead.

The first Federal Reserve policy meeting under new chief Kevin Warsh on Wednesday is expected to result in no change, while the Bank of England decision on Thursday is likely to be a split vote - though the consensus is a hold.

"Looking at market expectations, investors have gone from pricing in 2-3 Fed rate cuts this year to pricing no change and maybe even a late-year rate hike. Activity in Fed funds futures is presently pricing in a December rate hike with a 60% probability," said Ipek Ozkardeskaya, senior analyst at Swissquote.

"So investors will be seeking the answer to the following question today: what direction will the Fed take under Kevin Warsh? Is the Fed more likely to hold, cut or hike rates for the remainder of the year, and how will markets react?"

In equity news, Caledonia Investments said it was investing around �60m garden centre operator Blue Diamond. The investment will be made up of �40m to support future growth initiatives and the rest to facilitate shareholder liquidity. Following completion, Caledonia will hold a fully diluted minority shareholding of approximately 16%. Caledonia and Blue Diamond have also agreed a framework to make up to �40m of extra capital available to Blue Diamond over the next five years, for acquisitions, investment in the existing garden centre estate and shareholder liquidity.

Tool hire provider Speedy Hire reported a drop in full-year profitability, with adjusted underlying earnings falling to �85.4m from �97.1m and the group swinging to an adjusted pretax loss of �9.8m, compared with an �8.7m profit a year earlier. Speedy Hire said margins were hit by lower volumes, wage inflation and higher interest costs following accelerated fleet investment and its partnership with ProService transaction. Adjusted losses per share came to 1.71p, while operating profits also turned negative. Revenues were broadly stable at �416.1m, with growth in national accounts and services offsetting softer general hire activity.

White goods retailer AO World posted a spike in earnings and reiterated its full-year outlook, despite an uncertain backdrop. The blue chip saw revenues jump 11.4% in the year to 31 March, to �1.27bn, while adjusted pre-tax profits surged 16.1% at �50.5m on an improved gross margin. Looking to the current, AO acknowledged that the external environment remained "uncertain", including inflationary pressure. But confirmed pre-tax profits for the current year remained on track to meet consensus.