(Alliance News) - Stocks in London are set to open higher on Wednesday, as investors look ahead to US inflation figures.

IG says futures indicate the FTSE 100 to open up 21.8 points, 0.3%, at 7,304.32 on Wednesday. The index of London large-caps closed up 8.73 points, 0.1%, at 7,282.52.

The pound continued to extend its recent highs, nearing the USD1.30 mark. This follows Tuesday's red-hot wage inflation data, which pushed up expectations for interest rate hikes from the Bank of England.

Sterling was quoted at USD1.2962 early Wednesday, firming from USD1.2890 at the London equities close on Tuesday.

The pound's strength is likely to hold back the FTSE 100 somewhat, given many of its large constituents earn in dollars.

In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.9%, the S&P 500 up 0.7% and the Nasdaq Composite up 0.6%.

Market focus for the day will be on US consumer price inflation data at 1330 BST.

According to FXStreet-cited marked consensus, on an annual basis, the headline inflation figure is expected to cool to 3.1% in June from 4.0% in May. The core figure - which excludes food and energy - is expected to ease to 5.0% from 5.3%.

"With another rate rise due later this month this week's CPI numbers won't impact how the Federal Reserve is likely to act in 2 weeks' time, but the numbers might shine a light in whether we can expect another rate hike in September," said Michael Hewson, CMC Markets UK chief market analyst.

The dollar softened against major currencies.

The euro traded at USD1.1033, higher than USD1.0987. Against the yen, the dollar was quoted at JPY139.47, down versus JPY140.66.

In Asia on Wednesday, trading was mixed.

The Nikkei 225 index in Tokyo was down 0.7%.

Japanese price inflation eased last month, according to the Bank of Japan. In June, the producer price index rose 4.1% from the previous year, slowing from 5.1% in May. The reading was lower than FXStreet-cited market consensus of 4.3%.

Additionally, figures from the Cabinet Office revealed that machinery orders saw an unexpected decline in May. Excluding volatile orders, private-sector machinery orders shrank 7.6% month-on-month in May, after rising 5.5% in April. Market consensus had been expected 1.0% growth for May.

"The three-month sequential trend also declined, and as a result, we are a little concerned that Japan's investment recovery may lose some steam in the coming quarters," noted ING.

In China, the Shanghai Composite fell 0.3%, while the Hang Seng index in Hong Kong rose 1.2%. The S&P/ASX 200 in Sydney was up 0.4%.

Gold was quoted at USD1,939.05 an ounce early Wednesday, higher than USD1,931.42 on Tuesday. Brent oil was trading at USD79.51 a barrel, rising from USD79.28.

In Wednesday's UK corporate calendar, there are trading statements from pub firm JD Wetherspoon and ten-pin bowling operator Ten Entertainment Group.

In addition to the US inflation data, there will be an interest rate announcement from Canada at 1500 BST. The Canadian central bank is expected to hike rates by a final 25 basis points to 5.00%.

New Zealand's central bank left its key interest rate unchanged Wednesday, saying it expected inflation to ease further in coming months.

By Elizabeth Winter, Alliance News senior markets reporter

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