UK stocks look set to move lower at Wednesday's opening bell, with some analysts putting the drop down to a modest round of profit taking following a strong start to the week.
City sources predict the FTSE 100 will open around six points lower than yesterday's close of 6,779.31, despite gains seen in the US overnight following much better-than-expected reports on housing starts and building permits.
Wednesday's session will see the release of both the Bank of England (BoE) and Federal Reserve minutes from their latest meetings as the market speculates over the timing of interest rate hikes by the central banks.
The BoE earlier in August decided to keep policy unchanged, holding interest rates at 0.5%. While an improvement in the UK economy has put pressure on the Bank to lift rates, Governor Mark Carney said wage growth remained weak. The first rate hike is expected in the first quarter of 2015 with July's larger-than-expected dip in inflation expected to prevent policymakers from acting too soon.
Alpari analyst Craig Erlam said: "Despite seeing another strong session in the US on Tuesday, Asian markets struggled for direction overnight in a sign that a little caution is creeping in as we approach the release of the minutes from the recent BoE and Federal Reserve meetings.
"It's getting more and more difficult to predict what these central banks are going to do by assessing the data alone, so these minutes could provide crucial insight into the timing of the first rate hike from both central banks."
The Fed in July announced it would cut a further $10bn off monthly bond purchases and maintain interest rates at 0.25%. The US central bank has indicated that it sees no immediate need to lift rates, saying that the labour market still has room to grow.
Erlam continued: "The BoE minutes are likely to be the more hawkish of the two as it is expected to be the first to announce a 25 basis point rise in interest rates, although probably not until the first quarter of next year. Yesterday's [inflation] reading for July supports this view, with inflation currently standing well below target at 1.6%, allowing the BoE time to address the issue of slack and poor wage growth before considering the first rate hike."
In this morning's company news, profits at mining and trading giant Glencore rose in the first half of 2014, helped by marketing growth, production expansion and synergies from last year's merger with Xstrata and the 2012 acquisition of Viterra. The company also lifted its interim dividend by 11% and unveiled plans for a $1bn share buyback.
As expected, construction group Balfour Beatty rejected a merger offer from rival Carillion as not in its shareholders' best interests, noting that Tuesday's third offer was only a "small value change" from its precedent. The Balfour board again questioned the "considerable risks" around plans to significantly reduce the scale of the UK Construction business "when it is poised to benefit from a recovery in the market" and again dug in its heels about its intention to sell its US-based Parsons Brinckerhoff subsidiary.
UK Commercial Property Trust has posted a 6.8% increase in its net asset value (NAV) per share, which it said was mainly due to a 6% increase in the capital value of the property portfolio, which at the period end totalled £1.1bn. The group said the period had seen it deliver another strong performance, with a 10.1% NAV total return that was ahead of the IPD benchmark.