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 closed slightly higher at 6,675.03, after
trading as high as 6,708.17 earlier in the day.
The day's main event 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.
Gov. 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 this 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 noted that the U.K.'s unemployment rate has
fallen much faster than expected, and said its 7% threshold is
likely to be reached by spring.
Carney said, however, that rates will stay low well after that
point and the bank instead 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 economic growth in
2014 to 3.4%, from a previous estimate of 2.8%.
The pound rose after the inflation report, trading at $1.6578,
up from $1.6450 late Tuesday.
Among individual stocks, Wm. Morrison Supermarkets PLC rose
0.3%, 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 gained, 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%, Glencore Xstrata PLC
(GLCNF) rose 1.3%, and Rio Tinto PLC (RIO) added 1.5%.
But Tullow Oil PLC slumped 6.3% after the oil and gas explorer
said it is considering selling part of its stake in a Ugandan oil
field.
More must-reads from MarketWatch:
Forward Guidance 2.0: Is Carney just digging with a larger
shovel?
ECB 'seriously' considering negative deposit rate
Sold on gold: Miners signal a chance to go long
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