LONDON MARKETS: FTSE 100 Fails To Find Purchase As Traders Brace For Bank Of England

By Carla Mozee, MarketWatch Features Dow Jones Newswires

BOE expected to raise interest rates for first time in 10 years on Super Thursday

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Blue-chip stocks in the U.K. searched for direction Thursday, as investors prepared to hear from the Bank of England, anticipating what could be the first rise in British interest rates in 10 years.

The London benchmark was having troubling moving higher, in part as Randgold Resources Ltd. shares dropped following the miner's trading update.

What markets are doing: The FTSE 100 index was down less than 4 points at 7,485.75, as the basic materials, health care and consumer services groups fell. But utility and consumer goods stocks moved higher. The index on Wednesday fell 0.1% (http://www.marketwatch.com/story/ftse-100-drives-higher-despite-next-gloom-as-commodity-stocks-spread-cheer-2017-11-01).

The pound traded hands (http://www.marketwatch.com/story/pound-strengthens-ahead-of-historic-boe-decision-2017-11-02) at $1.3265, up from $1.3246 late Wednesday in New York.

Against the euro, sterling bought EUR1.1384, which is down from EUR1.1399 in the previous session.

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What's moving markets: The Bank of England is widely expected to raise its key interest rate by a quarter-percentage point to 0.5% when its decision is released at 12 p.m. London time, or 8 a.m. Eastern Time. Gov. Mark Carney will hold a press conference at 12:30 p.m. London time.

The first rate rise since July 2007 would come at a time when headline inflation stands at 3%, above the bank's 2% target. It would also come at a time when economic growth is weak, and there's lingering uncertainty about Brexit. On this so-called Super Thursday, the BOE will also release minutes of its meeting and its Quarterly Inflation Report.

Read:5 things investors need to know as the Bank of England prepares for historic rate hike (http://www.marketwatch.com/story/5-things-investors-need-to-know-as-the-bank-of-england-prepares-for-historic-rate-hike-2017-10-31)

Also check out:Here's how a Bank of England rate hike could 'kill' the British pound (http://www.marketwatch.com/story/heres-how-a-bank-of-england-rate-hike-could-kill-the-british-pound-2017-11-01)

Economic docket: IHS Markit/CIPS is expected to release its U.K. construction purchasing managers index at 9:30 a.m. London time, or 4:30 a.m. Eastern Time. A 48.0 reading for October is expected in a FactSet survey of economists.

What strategists are saying: "Despite the divisions that we've seen within the MPC and the fact that the decision appears far from straightforward, investors are almost entirely convinced that the BoE will raise interest rates," said Craig Erlam, senior market analyst at Oanda, in a note.

"Any indication that more rate hikes are planned for next year could trigger a sharp rally in the pound as I'm not convinced this is currently priced in," said Erlam, "while anything else may weigh on the currency once the initial volatility -- of which I expect a lot -- has passed."

"Although we don't think the Bank will increase rates again in 2018, that is not the message we expect the Monetary Policy Committee to deliver. Its forecasts are likely to be consistent with at least two further 25 basis points rate hikes over the next 2-3yrs in order to bring inflation back to the 2% target over that timeframe," said RBC Capital Markets senior U.K. economist Sam Hill.

Stock movers: Randgold Resources (RRS.LN) (RRS.LN) dropped 6.7% as the miner said its pretax profit fell in the third quarter after a decline in production. Production was down 9% (http://www.marketwatch.com/story/randgold-profit-hit-by-fall-in-production-2017-11-02) to 310,618 ounces of gold compared with the second quarter.

BT Group PLC (BT.A.LN) rose 1% as the telecommunications company held its interim dividend steady (http://www.marketwatch.com/story/bt-profit-revenue-drop-points-to-pension-deficit-2017-11-02) at the same time it said second-quarter pretax profit and revenue fell from the year-ago period.

(END) Dow Jones Newswires

November 02, 2017 04:50 ET (08:50 GMT)