LONDON MARKETS: U.K. Stocks Pare Losses After BOE; Rio Tinto Up

By Carla Mozee, MarketWatch

Carnival up on rating lift

LONDON (MarketWatch) -- U.K. stocks slightly pared losses Thursday after the Bank of England met expectations in keeping monetary policy unchanged, and shares of Rio Tinto PLC outperformed after the mining heavyweight's profit jumped.

The FTSE 100 index was down 0.1% to 6,627.52. The index was off 0.2% just before the central bank left its key lending rate at 0.5% and held the size of its bond-buying program at 375 billion pounds ($631 billion).

Next up for investors will be the Bank of England's quarterly inflation report, due Wednesday, as speculation ramps up that some policy makers will begin pushing for a rate hike from its record-low level.

Interest-rate futures currently indicate that the market is looking at the possibility of a rate hike in December. But Richard Perry, market analyst at Hantec Markets, said a rate hike may not arrive until early 2015.

The bank's quarterly inflation report due in February will include "new forecasts for inflation, for growth, for the economy," he said. "At that stage, when they've got it set in stone, I think that then you'll start to see a possibility of a rate hike in March," when the first meeting after the February inflation report will be held.

The pound (GBPUSD) slipped to $1.6845 per dollar compared with $1.6856 ahead of the bank's announcement Thursday. The pound bought $1.6854 on Wednesday.

The FTSE 100 fell 0.7% on Wednesday, driven lower alongside other global markets by worries about euro-zone growth and Russia's ongoing conflict with Ukraine.

Movers

Rio Tinto climbed 2% as company's first-half profit more than doubled on cost cuts and higher production of iron ore.

Shares of Carnival PLC gained 2% after the cruise operator's rating at Bank of America-Merrill Lynch was raised to buy from neutral.

Moving lower were shares of Old Mutual PLC , down by 2.3% following the investment and insurance firm's report that first-half pretax profit fell to 564 million pounds ($949.9 million) from GBP805 million in the same period a year ago.

EasyJet lost 1.6% after a ratings downgrade to equal weight from overweight at Barclays. "Despite an attractive valuation given recent underperformance, we now believe capacity concerns will continue to weigh on easyJet's multiple as we approach the winter, and we do not expect yield momentum to pick up until next summer," the analysts said.

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