By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- The U.K.'s benchmark stock index moved
firmly higher on Thursday, with banks and mining firms in the lead,
ahead of the latest monetary-policy decision from the Bank of
England.
The FTSE 100 index gained 0.9% to 6,392.26, on track to break a
three-day losing streak. The benchmark closed at the lowest level
since July 3 on Wednesday, as uncertainty about the government
shutdown and borrowing situation in the U.S. hampered
sentiment.
On Thursday, however, stock markets globally were more
optimistic, on signs Republicans and Democrats will agree on a
comprise to reopen government and raise the debt ceiling to avoid a
default.
In London, the Bank of England was in the spotlight ahead of the
Monetary Policy Committee's interest-rate decision due at noon
locally, or 7 a.m. Eastern time. Most analysts expect the central
bank to keep its key lending rate at a record low of 0.5% and make
no changes to its 375-billion-pound ($598 billion) asset
purchases.
"The BOE's rate decision is likely to put pressure on sterling.
Even though everything is expected to remain unchanged (...) BOE
Governor Carney will probably want to verbally dampen the
overstretched rate speculation," analysts at Commerzbank said in a
preview they sent out late last week.
The BOE in August tied the interest rate to the level of U.K.
unemployment, saying a rate hike is unlikely before the joblessness
level falls below 7%. The bank forecast this wouldn't happen until
2016, but with recent upbeat data and increasing signs the U.K.
economy is recovering, market participants speculate a rate hike is
on the cards before that.
The pound (GBPUSD) traded at $1.5939 ahead of the announcement,
down from $1.5953 late Wednesday.
Banks were among notable movers in the FTSE 100 on Thursday.
Royal Bank of Scotland Group PLC (RBS) climbed 2.7%, Barclays PLC
(BCS) gained 1.8%, Lloyds Banking Group PLC (LYG) added 1.7% and
sector heavyweight HSBC Holdings PLC (HBC) put on 1.2%.
Mining firms were also mostly lower, even as metals prices
dropped across the board. Shares of Glencore Xstrata PLC (GLCNF)
added 1.2%, Antofagasta PLC picked up 1.1% and Rio Tinto PLC (RIO)
rose 0.9%.
Shares of SSE PLC inched 0.4% higher, after the utility firm
said it will increase U.K. household electricity and gas tariffs by
an average of 8.2% from Nov. 15.
BAE Systems PLC climbed 1.3% after the aerospace and defense
firm said trading between July 1 and Oct. 9 had been in line with
management expectations.
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