By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks turned higher in midday
trade on Thursday after the Bank of England kept monetary policy on
hold, and after the European Central Bank cut interest rates in a
move aimed at boosting inflation and encouraging lending in the
euro zone.
The FTSE 100 index rose 0.1% to 6,824.54, on track to break a
two-day losing streak.
The benchmark traded as low as 6,795.27 earlier in the day, but
started to move higher after the BOE kept its key lending rate at a
record low of 0.5% and made no changes to its 375-billion-pound
($628 billion) asset-purchase program.
After the BOE decision was released, the ECB's Governing Council
cut its main lending rate to 0.15% from 0.25%. It also cut the
interest rate on its deposit facility to -0.1% from 0%, effectively
charging banks to leave excess reserves parked at the ECB. The rate
on its marginal lending facility was reduced to 0.40% from 0.75%.
Rate cuts by the ECB had been anticipated.
Investors will watch ECB President Mario Draghi's news
conference, set to begin at 1:30 a.m. London time, or 8:30 a.m.
Eastern Time, for any announcement of additional policy measures.
The ECB said further measures to "enhance the functioning of the
monetary policy transmission mechanisms" will be detailed in a
statement to be issued later.
The BOE decision was widely expected as the U.K. central bank
has signaled a rate hike won't be in the cards until 2015. However,
after a string of solid economic data, some analysts have started
to speculate that its first monetary tightening could come as early
as the fall of 2014.
The rate decision wasn't accompanied by any statement, so
investors will have to wait until the BOE policy-meeting minutes,
out on June 18, to see whether any members voted in favor of
monetary tightening.
The minutes from the May meeting showed some Monetary Policy
Committee members see the rate-hike discussion as becoming "more
balanced".
"The key will be whether the language becomes more hawkish, how
vigorous the discussion of a hike was, and what small changes the
rate setters make to their view of spare capacity and growth," said
Rob Wood, chief U.K. economist at Berenberg, in a note.
Weighing on the London benchmark, shares of BHP Billiton PLC
(BHP) shed 0.1% after RBC Capital Markets shifted its preference
within the mining space from BHP to Rio Tinto PLC (RIO).
Outside the main index in London, shares of ASOS PLC plunged 28%
after the online retailer warned full-year profit would fall short
of forecasts because of the strong British pound, higher
promotional activity and infrastructure investments.
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