UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Benchmark tries to follow up strongest session in more than two months

U.K. stocks sagged Thursday, pulling back after logging their strongest session in more than two months, as investors waited to hear if the European Central Bank will extend stimulus efforts for the eurozone, the U.K.'s largest trading partner.

The FTSE 100 shed 0.1% at 6,897.45, tilting into the red after rising earlier in the session. The index was held down as utility, industrial, oil and gas shares fell. But basic materials and consumer services shares were among advancing sectors.

The British blue-chip benchmark on Wednesday jumped 1.8% (http://www.marketwatch.com/story/ftse-100-climbs-1-powered-by-mining-shares-2016-12-07), its biggest percentage increase since early September. A win on Thursday would mark its fourth in a row.

"The uncontrollable exuberance of the week has hit the buffers this morning, with the impending ECB meeting raising uncertainty for investors," said Joshua Mahony, market analyst at IG, in an note.

At 12:45 p.m. London time, or 7:45 a.m. Eastern Time, investors will find out whether the ECB will extend the duration of its quantitative easing program, worth 80 billion euros a month, beyond March 2017. The central bank's decision on interest rates is also due.

Read:How Italy's jitters might be the ECB's silver lining (http://www.marketwatch.com/story/how-italys-no-vote-might-be-the-ecbs-silver-lining-2016-12-05)

"With market expectations already factoring in an extension, it is likely that the volatility could come about through any imposition of a tapering plan, with the bank having to find a way to gradually reduce the size of asset purchases as we approach the end of the program," said Mahony.

U.K. stocks have been among the beneficiaries of ECB bond buying, as investors have used proceeds from debt sold to the bank to purchase London-listed equities, among other assets.

"Even if we do not see any mention of a taper today, the release of inflation and growth projections from the ECB should go some way to shifting market expectations of when we will see it pull back from its incredibly loose monetary policy stance," Mahony said.

Ahead of the decision, the pound was buying $1.2686, up from $1.2621 late Wednesday. The pound against the euro was up roughly 0.1% at EUR1.1756.

Bank shares were mixed, with Barclays PLC (BCS) up 0.8% while Lloyds Banking Group PLC (LLOY.LN) shed 0.5%.

Movers: Capita PLC shares (CPI.LN) fell 7.4%, suffering the most since late September after the support services firm cut its 2016 profit forecast (http://www.marketwatch.com/story/capita-lowers-profit-guidance-starts-cost-cutting-2016-12-08), and said it is selling some of its businesses that no longer fit its core business strategy.

The planned disposal of its Assets Services division "may be due to it being viewed as non-core, but it accounts for nearly 10% of revenues, is one of the biggest contributors to underlying profits (16%) and appears to be performing 'well,'" said Mike van Dulken, Accendo Markets's head of research, wrote in a note.

"Further government-inspired Brexit uncertainty and clients shying away may also even mean that further profits warnings can't be excluded either," van Dulken added.

TUI AG rose 2.4% after the travel-services company posted a rise in fiscal-year profit (http://www.marketwatch.com/story/tui-profit-rises-trading-in-line-with-expecations-2016-12-08) and its dividend. It also said trading is in line with expectations over the winter.

Among mid-caps, shares of William Hill PLC (WMH.LN) dropped 8.6%, with The Times newspaper (http://www.thetimes.co.uk/article/cut-betting-terminal-stake-to-2-mps-demand-kl6lkqjvj) reporting that a cross-party group of U.K. lawmakers will demand stricter controls on betting machines.

(END) Dow Jones Newswires

December 08, 2016 05:47 ET (10:47 GMT)

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