Stock markets on both sides of the Atlantic marched to different beats on Wednesday, with Wall Street futures trading sideways ahead of earnings from Tesla and Netflix and UK stocks and bonds rallying after a surprise drop in British inflation.

Futures trading indicated the S&P 500 and Nasdaq 100 share indices would hold steady at the market open.

Tesla and Netflix are among the tech megacaps that dominate the S&P 500 and have driven the benchmark stock index to its highest in more than a year.

Tech stocks have been boosted by exuberance about artificial intelligence as well as hopes the Federal Reserve will soon end the aggressive interest rate rises that bludgeoned valuations of more speculative businesses in 2022.

Owning big tech is also the "most crowded" trade in global markets, Bank of America strategist Michael Hartnett warned in a note to clients this week. Hartnett also reported that fund managers surveyed by BofA were cautious about an "AI/tech bubble."

The tech sector now offers a "less attractive risk-reward than earlier this year," Citi head of US equity trading strategy Stuart Kaiser said.

INFLATION COOLS, STERLING DROPS

Across the pond, UK stocks outperformed on Wednesday after data showed headline British consumer price inflation fell to 7.9% year-on-year in June, against expectations for 8.2%.

This was just the latest downside surprise on prices for a major economy after more than 18 months of central banks cranking interest rates higher.

Also on Wednesday, final euro zone inflation data for June confirmed that the annual rate of price increases in the region declined to 5.5%.

The trend signalled "those lagged effects of higher rates and tighter monetary policy are coming home to roost," said Eren Osman, managing director of wealth management at Arbuthnot Latham.

Sterling lost 0.96% to trade at $1.291 as market bets that the Bank of England would raise interest rates as high as 6%, from the current 5%, faded out. Against the euro , the pound was 0.8% lower at 86.1 pence.

The BoE now had "the green light" for a 25 basis point (bps) rate rise next month, Pantheon Macroeconomics chief UK economist Samuel Tombs said, after markets had previously priced in a further 50-bps hike.

Sterling is still showing a 4% gain for the last three months, having boomed on speculation the U.S. Federal Reserve would end its rate hikes before the Bank of England does.

"Profit taking in sterling should not be a surprise," added Kenneth Broux, head of FX and rates corporate research at Societe Generale in London.

London's blue-chip FTSE 100 added 1.6% and the domestically focused FTSE 250 rose 3.2%, on track for its best daily performance since February 2.

In bond markets, the yield on the two-year UK gilt, which tracks interest rate expectations and moves inversely to the price of the government debt security, dropped 24 bps to 4.811%, set for its biggest fall since mid-March.

Germany's two-year bond yield fell 3 bps to 3.189%.

Benchmark 10-year U.S. Treasuries yields were 3 basis points lower at 3.789%.

(Additional reporting by Tom Westbrook in Sydney. Editing by Bernadette Baum, Kim Coghill and Chizu Nomiyama)