By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Mining firms led U.K. stocks lower on
Wednesday, offsetting strength for banks, as investors waited for
the U.S. Federal Reserve's policy decision later in the day.
The FTSE 100 dropped 0.2% to close at 6,558.82, adding to a 0.8%
loss from Tuesday.
The soft move came as investors were hesitant of making any big
moves ahead of the much anticipated monetary policy decision from
the U.S. Federal Reserve out at 7 p.m. in London, or 2 p.m. Eastern
Time.
Analysts expect the central bank to announce a reduction of $10
billion to $15 billion to its $85 billion-a-month bond-buying
program after signs the economy has improved. Read: How stocks may
react to the Federal Reserve decision
The Bank of England was also in the spotlight after saying the
nine members of its Monetary Policy Committee earlier in September
voted unanimously to keep both interest rates and the
asset-purchase program unchanged. The interest rate was kept at a
record low 0.5%, while the quantitative-easing program stayed at
375 billion pounds ($596.48 billion).
"A key question concerned whether there was any serious
consideration of reopening the asset purchase program, given that
interest-rate markets have continued to price in a still more
aggressive series of rate increases since forward guidance was
introduced last month," said Philip Shaw, chief economist at
Investec Securities, said in a note.
"There was relatively little here. The committee did not make a
comment to the extent that the shape of the yield curve was
unwarranted (as it has previously)...Its conclusion was that 'were
the recovery to falter, the case for further asset purchases would
be stronger,'" he added.
The Bank of England in August laid out its forward guidance on
interest rates, saying it will keep rates low at least until the
unemployment level falls to 7%, expected in 2016. Markets, however,
have looked to recent upbeat macroeconomic releases and have
started factoring in a rate hike toward the end of 2014.
Among notable movers in London, miners led the benchmark index
south as most metals prices dropped.
Shares of Antofagasta PLC dropped 1.8%, Rio Tinto PLC (RIO) gave
up 1.3% and BHP Billiton PLC (BHP) eased 0.6%.
Shares of Fresnillo PLC lost 3.2% to 10.08 pounds ($17.25) after
UBS cut the price target on the silver miner to GBP11.50 from
GBP12.50.
On a more upbeat note, banks helped curb losses for the London
index. Shares of Standard Chartered PLC gained 1.4%, Lloyds Banking
Group PLC rose 2.1% and Royal Bank of Scotland Group PLC (RBS) put
on 0.8%.
Also on the rise, shares of Smiths Group PLC added 2.6% after
the engineering company declared a special dividend for the full
year.
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