LONDON MARKETS: U.K. Stocks Search For Firm Direction As Banks Fall, Insurers Rise

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Investors focus on ECB policy update

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U.K.'s blue-chip stock benchmark swayed between small gains and losses on Thursday, with insurers rising after a compensation-rule victory, while bank shares struggle ahead of an interest rate update from the European Central Bank.

The FTSE 100 was up 2 points at 7,356.62, but has been darting in and out of positive territory as the market takes a cautious tone ahead of the ECB announcement. Financial and industrial shares were among the decliners, while consumer goods, oil and gas and utility stocks moved up. On Wednesday, the index fell 0.3% (http://www.marketwatch.com/story/uk-stocks-swept-lower-as-home-builders-insurers-come-under-pressure-2017-09-06) to log a third straight day of losses.

Shares of insurance companies rose after the government looked set to pedal back on a rule change that affects how compensation for personal injury is calculated.

The U.K.'s Ministry of Justice has drawn up draft legislation that would bring the Ogden rate, used to set personal-injury lump-sum payouts, to a range of zero and 1%. In March, the government cut the discount rate to minus 0.75%, from 2.5%, hitting profits at insurance companies.

"While the industry was prepared for a change to the discount rate, it was a lot harsher than anyone had planned. Today's changes won't be applied retrospectively and will take time to take effect, but they should be cheered by investors," said Neil Wilson, senior market analyst at ETX Capital, in a note.

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On Thursday, shares of Direct Line Insurance Group PLC (DLG.LN) climbed 3.3%, and Admiral Group PLC (ADM.LN) rose 0.8%.

ECB ahead: The key question at Thursday's ECB meeting is whether the central bank will start tapering its EUR60-billion-a-month bond-buying program, or hold off for fear of denting the eurozone's economic recovery.

The bond-buying program has helped push equities higher, as investors have used proceeds from bond sales to the central bank to buy assets such as U.K.-listed shares.

The ECB's interest-rate decision is scheduled for release at 12:45 p.m. London time, or 7:45 a.m. Eastern Time. A press conference with ECB President Mario Draghi will follow at 1:30 p.m. London time.

The pound slipped against the euro ahead of the ECB announcement, buying EUR1.0911 compared with EUR1.0944 late Wednesday in New York. The ECB has signaled its concern about strength in the euro this year.

Sterling was up against the dollar, trading hands at $1.3062 compared with $1.3042.

Read:Here's how the ECB got 'stuck in the euro trap' on its way to winding down QE (http://www.marketwatch.com/story/heres-how-the-ecb-got-stuck-in-the-euro-trapon-its-way-to-winding-down-qe-2017-09-05)

Banks down: In London, shares of banks followed those of European lenders lower, on the widely held expectation that the ECB will leave its key interest rates unchanged. Higher interest rates could bolster net interest margin at banks.

Shares of HSBC PLC (HSBA.LN) (HSBA.LN) lost 0.4%, Barclays PLC (BCS) (BCS) was off 0.9%, Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) fell 0.8%, and Standard Chartered PLC (STAN.LN) gave up 1.2%.

Meanwhile, Royal Bank of Scotland (RBS.LN) slid 1.4% as U.K. lawmakers called on the Financial Conduct Authority to publish its report on potential missteps by the bank's business restructuring unit.

Stock movers: Shares of Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) and BP (BP.LN) (BP.LN) each rose 0.6%. The moves came as oil prices extended gains booked Wednesday, when prices closed at a four-week high.

Oil prices are reflecting concerns about the potential hit to production from Hurricane Irma. Investors are also assessing the prospect of renewed demand for crude, as Gulf Coast refineries reopen after Hurricane Harvey.

See:Death toll rises to 8 as Hurricane Irma barrels through Caribbean, heads for Florida (http://www.marketwatch.com/story/death-toll-rises-to-8-as-hurricane-irma-barrels-through-caribbean-heads-for-florida-2017-09-07)

Off the FTSE 100, Bovis Homes Group PLC (BVS.LN) jumped 7.7%, even as the home builder posted a 31% drop in first-half pretax profit (http://www.marketwatch.com/story/bovis-homes-profit-down-31-on-costs-2017-09-07). Revenue increased 3.6% to GBP427.8 million on an increase in average selling price. Bovis's new strategic plan should be well received by investors, as it could drive up per-share earnings growth, said analysts at Liberum in a note.

On the mid-cap FTSE 250, Capita PLC (CPI.LN) fell 4%. The business support services group said Thursday it will restate 2016 profit lower (http://www.marketwatch.com/story/capita-shares-fall-after-it-restates-2016-profit-2017-09-07) after adopting a new accounting reporting standard.

(END) Dow Jones Newswires

September 07, 2017 06:03 ET (10:03 GMT)