Yahoo Finance LIVE: FTSE and Wall Street slump as traders bet on 0.5% UK interest rate rise
A look at how the major markets are performing on Wednesday
Wall Street followed European stock markets lower on Wednesday on the back of news that UK inflation stuck at 8.7% in the year to May.
In London, the FTSE 100 (^FTSE) fell 0.2% by the end of the session, while the CAC (^FCHI) tumbled 0.4% in Paris, and the Frankfurt DAX (^GDAXI) was 0.5% lower.
It came as the Office for National Statistics (ONS) said annual inflation held steady from the same level in April, reversing two months of improvement as the soaring cost of living adds to pressure on households. City economists had forecast a figure of 8.4%.
This puts more pressure on the Bank of England (BoE) to rein in control of the economy as price rises remain high. City analysts now largely believe the Bank will raise rates by 25bps, with some even factoring the very likely possibility of a 50bps rise.
Across the pond, the S&P 500 (^GSPC) dipped 0.6% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) fell 1.4%. The Dow Jones (^DJI) edged 0.1% lower.
Read more: Inflation stuck at 8.7% as cost of living squeeze continues
Paul Dales, UK chief economist at Capital Economics, said: "The problem is that the recent surge in core inflation and the reacceleration in wage growth shows that domestic inflationary pressures are still strengthening. This suggests the Bank may have more work to do than the Fed or ECB.
"We think a 25bps rise in interest rates tomorrow alongside some hawkish noises will be followed in the coming months by two more hikes to a peak of 5.25%.
"But it is possible that the Bank will raise rates by 50bps tomorrow and will need to hike rates above 5.25% to get on top of core inflation.
Read more: Bank of England likely to raise interest rates to 5% after inflation shock
Watch: How does inflation affect interest rates
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