By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks moved lower on Tuesday, with
banks and resource firms leading the charge south, even as data
showed inflation moved closer to the Bank of England's target in
November and strengthened the case for maintaining low interest
rates for longer.
The FTSE 100 index lost 0.4% to 6,494.60, after rallying the
most since mid-October on Monday.
The benchmark opened in negative territory and remained lower
after the Office for National Statistics said inflation fell to
2.1% in November from 2.2% in October, the lowest rate since
November 2009. The slowdown brings inflation closer to the BOE's
target of 2% and should reinforce the bank's commitment to keep
interest rates low until unemployment falls.
"Inflation is under control and is unlikely to deal the killer
blow to the BOE's forward-guidance policy," said Rob Wood, chief
U.K. economist at Berenberg, in a note.
"It will probably drop below the Bank of England's 2% target in
the second half of the year, providing much needed relief to
squeezed households and allowing the Bank of England to keep
interest rates at rock-bottom levels until 2015. Real wages could
begin rising again in the first half of the new year, which helps
drive our forecast of 2.6% GDP growth for 2014," he added.
Among notable movers in the London index, shares of Admiral
Group PLC gave up 2.4% after the U.K.'s Competition Commission said
it is looking into ways to lower car insurance costs. The move
comes after a report on the GBP11 billion ($17.93 billion) industry
showed motorists were shouldering unnecessary costs.
Oil firms were also on the decline, tracking oil prices lower.
Shares of BP PLC (BP) dropped 1.5% .
Some mining firms dropped as most metals posted losses. Shares
of Anglo American PLC lost 1% and BHP Billiton PLC (BHP) slipped
0.5%. There were some gainers, with Rio Tinto PLC (RIO) rose
1%.
Banks further dragged on the U.K. index, falling in line with
the broader financial sector across Europe and weighed by fears
that the U.S. Federal Reserve could announce a reduction in its
bond buying at its policy-setting meeting on Wednesday. Barclays
PLC (BCS) lost 0.9% and HSBC Holdings PLC (HSBC) dropped 0.8%.
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