(Alliance News) - Stocks in London are set to open lower on Wednesday as market mood remained cautious amid the prospect of interest rates in the world's largest economy remaining higher for longer.

IG says futures indicate the FTSE 100 to open 7.72 points lower, or 0.1%, at 7,618.0 on Wednesday. The index of London large-caps closed just 1.73 points higher at 7,625.72 on Tuesday.

"Investors continue to grapple with the implications of an extended period of elevated interest rates and the potential economic repercussions," said Stephen Innes at SPI Asset Management, adding that the looming possibility of a US government shutdown was not helping matters.

Last week, the US Federal Reserve left its benchmark interest rate at a 22-year high on Wednesday but signalled it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

Fed Chair Jerome Powell, speaking at a press conference following the decision, pledged to keep rates restrictive until confident inflation was moving down to 2%, saying there was a "long way to go".

Adding to investor anxiety around the US, on Monday, the Moody's ratings agency warned that a US government shutdown this weekend, amid political deadlock in Congress, would have negative implications for the country's top-tier credit rating.

The warning from Moody's – the only major agency to maintain its rating for US sovereign debt at its highest level – underscores the potential economic danger to the US of failing to reach an agreement to keep the government funded before the end of the month.

Wall Street on Tuesday ended firmly in the red amid the anxiety, with the Dow Jones Industrial Average down 1.1%, the S&P 500 down 1.5% and the Nasdaq Composite down 1.6%.

The greenback, meanwhile, strengthened on Wednesday morning as traders fled to the safety of the safe-haven dollar.

Sterling was quoted at USD1.2147 early Wednesday, down from USD1.2163 at the London equities close on Tuesday. The euro traded at USD1.0559, lower than USD1.0576. Against the yen, the dollar was quoted at JPY149.03, higher versus JPY148.91.

In Tokyo on Wednesday, the Nikkei 225 index was down 0.3%. The S&P/ASX 200 in Sydney was down 0.3%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 0.5%.

Equities in China were set for a positive finish despite further bad news for beleaguered Chinese property developer China Evergrande.

According to anonymous sources cited by Bloomberg News, Xu Jiayin, the boss of Evergrande, was taken away by authorities earlier this month.

He is being held under "residential surveillance", the report said, which does not mean he has been arrested or charged with a crime.

The company's property arm this week missed a key debt payment due, and Chinese financial website Caixin reported that former executives at the firm had been detained.

On Sunday evening, Evergrande announced that it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, was being investigated.

Gold was quoted at USD1,897.82 an ounce early Wednesday, lower than USD1,903.23 at the London equities close on Tuesday. Brent oil was trading at USD93.15 a barrel, higher than USD92.37 late Tuesday.

In Wednesday's corporate calendar, there are half-year results from Saga, Old Mutual and Everyman Media.

In the economic calendar, there is a non-monetary policy meeting for the European Central Bank.

By Heather Rydings, Alliance News senior economics reporter

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