FTSE 100 Set to Fall as High Bond Yields Outweigh Softer US Inflation

The FTSE 100 is expected to open around 45 points lower on Thursday, extending Wednesday's decline. This comes despite softer US inflation data, which reduces expectations for a Federal Reserve rate increase.

US core PCE inflation rose 0.2% month-on-month and 3.0% year-on-year in August, below market expectations. However, this relief was insufficient to offset the pressure from longer-dated bonds. The US 10-year Treasury yield reached its highest level since June 2007 at 5.306%.

The Dow fell 0.9% and the S&P 500 lost 0.3%, while the Nasdaq gained 0.2%. Asian markets were mixed, with Japan's Nikkei 225 jumping over 3% due to strong results from US memory-chip maker Micron. However, Australian equities fell sharply.

Oil prices also played a significant role in the market backdrop, falling around 1.4% to $96.64 a barrel. Cheaper crude has a mixed impact on the FTSE 100, reducing inflation pressure and benefiting fuel-intensive businesses but potentially weighing on BP and Shell.