(Alliance News) - Stocks in London are set to open flat on Thursday, after a bruising session on Wednesday as hopes for interest rate cuts fade further.

IG says futures indicate the FTSE 100 to open down 0.7 of a point at 7,445.59 on Thursday. The index of London large-caps closed down 112.05 points, 1.5%, at 7,446.29 on Wednesday.

"The FTSE 100 had its worst day since August sliding to its lowest levels since late November, dragged down by a combination of poor performance from real estate, basic resources and energy after disappointing Chinese economic data, and the prospect of rate cuts getting pushed further into 2024," CMC Markets UK chief market analyst Michael Hewson explained.

A combination of cautious words from the Federal Reserve on Tuesday, Wednesday's robust US retail sales data, and the recent uptick in inflation served to damp the market's expectations of interest rate cuts from the Fed.

According to CME's FedWatch tool, the probability of a 25 basis point rate cut in March has dropped to 60% from 70% a week ago.

Hopes for rate cuts from other major central banks have also been tempered in recent days. European Central Bank President Christine Lagarde suggested monetary policy in the eurozone would not be eased until the summer. Meanwhile, the latest rebound in UK headline inflation has cast doubt over the timing of when the Bank of England will bring down bank rate.

Sterling was quoted at USD1.2685 early Thursday, higher than USD1.2668 at the London equities close on Wednesday. The euro traded at USD1.0894, higher than USD1.0853. Against the yen, the dollar was quoted at JPY147.99, down versus JPY148.43.

In the UK, investors will be keeping an eye out for comments from Chancellor Jeremy Hunt, as he visits Davos in Switzerland. Hunt will tell political and business leaders at the World Economic Forum that the UK is "on the up and open for business".

Hunt's trip to the exclusive Swiss ski resort to join the annual gathering of international movers and shakers will be the first time a UK chancellor has attended the forum in five years.

The Treasury said the chancellor will use his visit to champion the UK's ambition to be a science and technology superpower and pitch that the country is ripe for investment from the international business community.

In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.3%, while the S&P 500 and the Nasdaq Composite both closed down 0.6%.

In Asia on Thursday, the Nikkei 225 index in Tokyo was marginally lower. In China, the Shanghai Composite was down 0.8%, while the Hang Seng index in Hong Kong was up 0.6%. The S&P/ASX 200 in Sydney closed down 0.6%.

Gold was quoted at USD2,008.11 an ounce early Thursday, little changed from USD2,009.77 on Wednesday.

Brent oil was trading at USD78.09 a barrel, higher than USD77.55.

Thursday's economic calendar has the latest US initial jobless claims reading at 1330 GMT.

The local corporate calendar has trading statements from gaming firm Flutter, fast fashion firm boohoo, electricals retailer Currys and boot maker Dr Martens.

By Elizabeth Winter, Alliance News deputy news editor

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