By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks moved cautiously higher on
Wednesday, as investors weighed the revamped forward-guidance
framework from the Bank of England and speculated when the first
rate hike would come.
The FTSE 100 index was slightly higher at 6,674.60, after
trading as high as 6,708.17 earlier in the day.
The main event for investors in London was the Bank of England's
quarterly inflation report. The central bank revamped its forward
guidance, leaving traders and economists confused about when to
expect the first interest-rate hike. read: Forward Guidance 2.0: Is
Carney just digging with a larger shovel?
Governor Mark Carney indicated rates could rise in the second
quarter of 2015 rather than 2016 as previously forecast, but
several analysts argued an increase could come before that. Nomura
forecast the first rate hike to come in August, while Rob Wood,
chief U.K. economist at Berenberg said the first quarter of 2015
was more likely.
"Carney's approach today was the right response to the
developments in the economy, with slack materially eroding and
prospects for growth improving. The first rate hike will need to
come sooner than they previously thought, so they have backed away
from dovish guidance," Wood said in emailed comments.
"Though, in our view, unemployment will fall faster than the
Bank is expecting so the first rate hike will come sooner [than the
BOE forecasts]," he added.
The central bank did address the improving labor market and said
the U.K. unemployment rate has fallen much faster than expected and
its 7% threshold is likely to be reached by the spring of this
year.
Carney said, however, that rates will stay low well after the
threshold is reached and instead the bank will consider a broad
range of indicators, including the unemployment rate, business
surveys and the number of hours worked.
The bank also lifted its expectations for gross-domestic-product
growth in 2014 to 3.4%, from a previous estimate of 2.8%, while
stressing that the U.K. recovery has gained momentum.
The pound rose after the inflation report, trading at $1.6578,
up from $1.6450 late Tuesday.
In the corporate space, Wm. Morrison Supermarkets PLC rose 0.6%,
after Bloomberg reported that the supermarket chain has contacted
private-equity funds to potentially take the company private. A
representative from Morrisons wasn't immediately available to
comment.
Mining firms were also on the rise, tracking metals prices
higher. The sector was boosted by upbeat trade data from China,
which showed imports increased 10% in January. This indicated a
pickup from December and beat analyst expectations. China is a
major user of natural resources, so any signs of a rise in demand
in the country tend to help metals prices and miners.
Shares of Anglo American PLC gained 1.1%, Glencore Xstrata PLC
(GLCNF) rose 1.4%, and Rio Tinto PLC (RIO) added 1.4%.
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