(Alliance News) - Stocks in London are set to open lower on Friday, as investors across the globe anticipate major central banks will keep interest rates higher-for-longer.

IG says futures indicate the FTSE 100 to open down 20.0 points, 0.3%, at 7,482.03 on Friday. The index of London large-caps closed down 57.15 points, or 0.8%, at 7,502.03 on Thursday. It has shed 0.8% so far this week and is on a four-day losing streak.

"European markets fell for the fourth day in succession yesterday, driven lower on worries that central banks will look through concerns over a slowdown in economic activity and prioritise the battle against inflation, and look set to open lower this morning," said CMC Markets analyst Michael Hewson.

On Thursday, the Bank of England surprised with a chunkier-than-expected 50 basis point interest rate hike.

A 25 basis point hike had been largely expected. However, following Wednesday's red-hot consumer price index data, bets on a half-point hike had increased, with the expectation that a more aggressive move may better tame the UK's stubborn annual inflation rate.

Despite the rate hike, the pound retreated against the dollar, as investors judged the UK's economic prospects to be fairly gloomy. The dollar also gained strength, after recent hawkish rhetoric from the Federal Reserve.

Sterling continued to struggle early Friday, buying USD1.2707, down from USD1.2741 at the London equities close on Thursday. The euro traded at USD1.0928, lower than USD1.0953. Against the yen, the dollar was quoted at JPY143.22, up versus JPY142.86.

Over in Asia, trading was downbeat on Friday, as investors feared for the toll high interest rates would take on global economic growth.

Financial markets in Shanghai remained closed for the Dragon Boat Festival holiday, though they re-opened in Hong Kong. The Hang Seng index was down 2.0%. The S&P/ASX 200 in Sydney was down 1.4%.

The Nikkei 225 index in Tokyo was down 1.9%, as Japan's consumer inflation reading came in hotter than expected.

Excluding volatile fresh food, Japan's consumer prices rose 3.2% year-on-year in May, with the pace of inflation slowing from the 3.4% recorded in April, government data showed Friday.

The hotter-than-expected print fuelled speculation on whether the Bank of Japan will shift away from its ultra-loose monetary policy that has dragged on the yen. A weak yen has been a key reason for the strength of Japanese equities in recent weeks.

Meanwhile, the latest purchasing managers' index data from au Jibun Bank revealed business growth in Japan slowed in June. The services sector saw a softer rise in activity, while manufacturing slipped back into contraction amid muted domestic and international demand.

In the US on Thursday, Wall Street ended mixed, with the Dow Jones Industrial Average marginally lower, the S&P 500 up 0.4% and the Nasdaq Composite up 1.0%.

Gold was quoted at USD1,916.46 an ounce early Friday, higher than USD1,913.60 on Thursday. Brent oil was trading at USD73.43 a barrel, down from USD74.22.

In Friday's UK corporate calendar, there are full-year results from volume monitoring systems provider Vianet.

The economic calendar has a slew of flash PMI prints from the EU, UK and US from 0900 BST. There are also UK retail sales at 0700 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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