UK stocks are set to track both US and Asian markets lower early on, as indicies around the world fell on the back of comments made by Federal Reserve Chairwoman Janet Yellen.
The FTSE 100 is expected to fall around 40 points from yesterday's closing level of 6,573.13 early on.
Yellen caught markets off guard by saying that the first rate hike could come six months after quantitative easing (QE) ends.
Yellen's comments came after the Federal Open Market Committee voted to taper its asset purchase programme by another $10bn a month to $55bn, its third staged reduction of stimulus.
If the central bank continues to taper at the same rate over the next month months, QE should come to an end in October or November, which means that interest rates could rise as soon as April of May. Ahead of this week's meeting, analysts had widely expected a rate hike to come towards the end of 2015.
While the unexpected hawkishness from the new Fed chair came as a surprise to many, the message delivered about the economy was upbeat, as policymakers lowered their forecasts for unemployment which is set to fall to 6.1-6.3% by the year-end.
The Fed also adjusted its forward guidance to put less emphasis on joblessness as a goalpost for when tightening will begin. Instead - similar to Governor Mark Carney's revamped forward guidance at the Bank of England - the Fed will look at a broad range of economic indicators in their decision.
Craig Erlam, Market Analyst at Alpari, said: "Last night was a prime example of the market hearing only what it wants to hear and ignoring all of the caveats, which more often than not make the initial statement irrelevant. On this occasion they chose to ignore the caveat and a lot got burned, it will be interesting to see if history repeats itself next year.
"Another interesting point here is that many in the markets have assumed for a while that the first rise in interest rates could come as early as the middle of 2015, so these comments from Yellen are only in line with expectations.
"I think what we saw yesterday was a case of Yellen showing her inexperience in this situation, which is perfectly understandable given that it was her first press conference as Fed Chair [...] Taking into consideration Yellen's comments, I still don't think the first rate hike will come until later in 2015, although a lot can change between now and then."
Attentions remain focused on Russia ahead of European Council meeting
Heightened geopolitical tensions between Russia and the West were acting as a backdrop for markets on Wednesday after US President Barack Obama called for a meeting with G7 to discuss further possible sanctions on officials following the annexation of Crimea.
UK Prime Minister David Cameron has reportedly called for economic sanctions to be agreed upon at Thursday's meeting of the European Council, according to remarks from some of those expected to attend the meeting, such as Czech Prime Minister Bohuslav Sobotka.
The latest information points to divisions between France and Germany over whether to permanently oust Russia from the G-8.
Bloomberg cited analysts who said there was a rising possibility that Washington will target the assets of several state-owned enterprises as early as this week.
Next posts results at top end of expectations
Next reported annual profit that met the top end of its guidance, driven by growth in online sales. The fashion retailer achieved an 11.8% rise in pre-tax profit to £695m in the year through January 2014. In January the company raised its annual pre-tax profit guidance to £684m-700m, compared to £650m-680m previously.
Mitie, the FTSE 250 strategic outsourcing company, has been awarded a renewed contract with a base value of more than £75m over a five-year period to provide integrated facilities management for Network Rail. The news came as the group gave an update on its recent performance, which it said had been strong, particularly in Facilities Management, and that its underlying full-year results would be in line with market expectations.
Housebuilder Crest Nicholson said it continued to benefit from the government's shared equity scheme as well as improving market conditions and, against a backdrop of rising confidence, expects to deliver strong growth in revenues in the year ahead. Open-market reservation rates from November 1st to March 7th 2014 rose 13% from the equivalent period last year. Forward sales for 2014 and beyond surged 50% to £330m as average selling prices continue to grow steadily.
United Utilities, the UK water and wastewater company, said that trading for the 12 months ending March 31st has been in line with expectations with revenue expected to grow from the previous year. The firm said this reflected the regulated price change for 2013/14.
Second half sales growth slowed and margins were slightly compressed for fashion retailer Ted Baker but annual results were still just ahead of forecasts. Profits before tax and exceptional costs rose 26.7% to £40m on revenues ahead 26.5% to £321.9m. Adjusted earnings per share climbed 22.3% to 69p, with the total dividend lifted 26.7% to 33.7p.