After a Devon Loch style collapse for US stocks late on Monday, the FTSE 100 and other European indices started Tuesday on the back foot.
AJ Bell investment director Russ Mould said: “Sentiment soured on Wall Street as two members of the Federal Reserve indicated rates would need to move above 5% in 2023 to curb inflationary pressures and this helped erase earlier gains.
“So far this year there has been increasing hope of a softish landing for the US economy – that hope could be punctured if the Fed retains a hard line on rates. With that in mind all eyes will be on Fed chair Jerome Powell when he addresses a conference on central bank independence in Stockholm later.
“Inflation figures out on Thursday also represent a test for the relative optimism of the markets so far this year.”