Dovish BoE helps buoy Britain's FTSE

Wed Aug 13, 2014 11:56am EDT

* FTSE 100 ends 0.4 pct in choppy, thin trade

* Banks, utilities up as rate hike expectations pushed back

* Strong emerging markets, North America results lift G4S

By Francesco Canepa

LONDON, Aug 13 (Reuters) - Britain's top share index ended slightly higher in thin trade on Wednesday, boosted by a dovish message from the Bank of England.

Financial markets pushed back expectations for a UK interest rate rise until the first quarter of next year at the earliest after the Bank of England, in its quarterly Inflation Report, slashed its wage growth forecasts and said this metric would be key to determining future rate rises.

That pushed sterling to a 10-week low against the dollar.

With low bond yields fuelling demand for equities and 75 percent of revenues from UK blue chips coming from overseas, the BoE's report has a silver lining for London-listed companies, which benefit from a weaker sterling and low interest rates.

"It's positive for the market, I'm sure, but it could allow inflation to come in which is harder to control in the medium term," 4-Shires Asset Management managing director Jeremy Le Sueur said.

"For exporters the pound needs to be a lot lower. Domestic bond-like plays such as utilities are going to benefit if we are going to have interest rates lower for longer."

Utilities Severn Trent and United Utilities, and domestically focused banks Royal Bank of Scotland and Barclays all rose more than 1 percent.

The FTSE 100 closed 24.26 points higher, or 0.4 percent, at 6,656.68 points after a choppy session marked by low trading activity.

The index briefly trimmed gains after data showed U.S. retail sales unexpectedly stalled in July, pointing to some loss of momentum in the world's largest economy early in the third quarter.

"The only important data point ... was weaker than expected," a trader in London said. "Since the second quarter didn't end all that well, it compounds the weakness of today's report."

Shares in G4S, the world's biggest security company, led advances, up 5.3 percent, after the group posted a better-than-expected rise in first-half operating profit. It posted revenue growth in emerging markets and North America, offsetting a decline in Europe.

Trading volume in the stock was over five times its full-day average for the past three months, compared with market volume 20 percent below the FTSE 100's own average.

Stocks trading without their dividend entitlements - including heavyweights such as pharmaceuticals group AstraZeneca , oil major Royal Dutch Shell and miner Rio Tinto - capped gains on the FTSE, shaving about 21 points off the index.

Motor insurer Admiral Group was the biggest loser, down 5.4 percent after reporting a 9 percent fall in UK motor premiums.

The FTSE has come under pressure in the past month as fears of economic fallout from conflict in Ukraine and Iraq have added to worries about a tightening of monetary policy in Britain and the United States while the economic recovery remains fragile.

In this context, traders were reluctant to buy on dips, waiting for the FTSE 100 to fall more before making a move.

"We have identified the 6,439 level as a potential buy zone," said Rob Colville, chief executive officer of technical trading firm The Lazy Trader, referring to a support level tested in December and February. (Additional reporting by Tricia Wright Editing by Jeremy Gaunt)