By Francesco Canepa
LONDON, Dec 5 (Reuters) - Britain's benchmark equity index
fell for a fifth straight day on Thursday, its longest losing
streak since March, as improving U.S. economic data fuelled
worries that the Federal Reserve may cut its equity-friendly
stimulus programme early.
The U.S. economy grew faster than initially estimated in the
third quarter, data showed, encouraging bets that unemployment
and non-farm payrolls data due to be published on Friday could
also beat expectations.
While stronger global growth is generally good for corporate
profits, it may lead Fed chairman Ben Bernanke to advance cuts
to the bank's bond purchase programme, which has driven
investors out of lower-yielding bonds into equities and has
helped the FTSE rise 15 percent in the past year.
'In the very first short term, are we going to have wobbles
if Bernanke starts tapering? It's entirely possible,' said Simon
Murphy, who manages a UK equity fund for Old Mutual Global
'The fact that we're getting strong data from the likes of
the U.S. is a sign that... we've worked through the financial
crisis and we're coming out on the other side. So, from a medium
term perspective, I think the UK equity market can make some
The blue-chip FTSE 100 index was down 8.78 points,
or 0.1 percent, at 6,501.19 points at 1551 GMT.
The FTSE has sunk nearly 5 percent from October's peak of
6,819, as robust data re-ignited speculation that the Fed could
start reducing its quantitative easing (QE) programme before the
end of the year.
'We're not through the 'good news is bad news' phase quite
yet - and I suppose if we get a strong payroll number tomorrow,
then the talk about the tapering (being announced at the
December meeting) will be back on the table again,' said Ian
Williams, a strategist at Peel Hunt.
Positive news at home helped the mid-cap FTSE 250,
which has greater exposure to Britain's domestic economy, rise
54.49 points, or 0.4 percent, to 15,182.44 points.
Chancellor George Osborne said the British economy was on
track to grow by 1.4 percent this year, more than double his
March forecast, and 2.4 percent next year, up from the previous
estimate of 1.8 percent.
Meanwhile, the Bank of England left its monetary policy
unchanged and stuck to its commitment to keep interest rates at
a record low until Britain's recovery is more firmly
'Even with the GDP up-revisions, the UK's loss over the
cycle of a quarter of a percentage point a year in potential
growth may take years to claw back,' Neil Williams, the chief
economist at Hermes, said in a note.
'This, plus chance of more benign ... inflation in 2014,
stress the importance of keeping a loose monetary stance - with
the BoE right to defer any Bank rate hike.'
Both the government and the Bank of England's decisions were
widely expected, so market reaction was relatively muted.
(Editing by Mark Heinrich)
Keywords: MARKETS BRITAIN STOCKS/CLOSE
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