FTSE 100 climbs on energy, retail stock boost; BoE meeting eyed

London's FTSE 100 advanced on Thursday, led by energy and retail stocks, as investors awaited clues on inflation outlook and taper timeline from a Bank of England meeting following a hawkish tilt by the U.S. Federal Reserve. The blue-chip FTSE 100 rose 0.4% and was set for a third consecutive session of gains. Aero-engine and automobile maker Rolls-Royce jumped 2.5% to a six-month high and was the top FTSE 100 gainer after Berenberg raised its target price.

The domestically focussed mid-cap index climbed 0.7%. Retail and energy stocks rose 0.7% and 0.4% respectively and were among the top gainers in early trading.

Britain's central bank looks set to keep interest rates steady later in the day as it approaches the end-point of its 895 billion pounds ($1.22 trillion) asset purchase program on the backdrop of rising inflation. The decision is due at 1100 GMT. "The BoE is already ahead of other central banks in reducing the pace of its asset purchases, so the market is prepared for any taper commentary, but the bigger question is on the timeline of rate hikes and how the central bank plans to tackle inflation headwinds," said James Smith, an economist at ING.

The Fed said on Wednesday it would likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases might follow more quickly than expected. The FTSE 100 has gained 10% so far this year and is on track to record a weekly gain for the first time in three weeks on re-opening optimism and easy monetary policies. However, rising inflation pressures due to surging energy costs continue to weigh on sentiment.

London-listed shares of South Africa-based financial services group Investec gained 2.4% after it said it expected an up to 114% rise in half-year profits. Britain's Mitchells & Butlers Plc rose 1.7% after it said sales over the past two months had been above pre-pandemic levels.

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