Britain's top shares dipped on Thursday as UK interest rates rose for the second time in two months, with more rises expected in a bid to cool the economy, but services firm Rentokil jumped on take-over speculation.
Betting shop chain William Hill fell 3.3 percent after its chief executive sold nearly all his shares in the company, prompting brokerage Seymour Pierce to advise investors to follow suit as competition in the sector intensifies.
The FTSE-100 share index closed down 3.4 points at 4,486.1, after failing to break out of a range of 4,475 to 4,494 points, its tightest daily range for three months.
Volume was slim at just over two billion shares as dealers said public holidays in Europe and the closure of the US market on Friday compounded the summer lull.
"Markets are still relatively close to this year's highs so there's not a huge amount of upside, but it's difficult to see an environment where people are going to get desperately bearish," said Nigel Cobby, managing director of European equities at J.P. Morgan. "So our view is there's still a reasonable amount of upside in equities, but it's not dramatic."
Rentokil topped the FTSE leader-board with a 5.5 percent rally as talk resurfaced that the provider of services from security to pest control, which issued a profit warning in May, may be bought or sell parts of its business.
Dealers said a rise in the price of Rentokil's credit default swaps had fanned speculation of a potential leveraged buyout or break-up. Rentokil declined to comment.
Midday news that the Bank of England would raise base rates by 25 basis points to 4.5 percent had a muted impact.
The rise had been expected by a slim majority of economists after recent strong retail and manufacturing data and buoyant house prices, although analysts said the Bank's comments were more hawkish than expected and signal more rises on the horizon.
David Brown, chief economist at Bear Stearns, welcomed the gradual tightening policy. "I don't think it will do too much damage to stocks. We're in a global recovery scenario, and the FTSE's going to benefit from the strong growth picture that's benefiting the global economy," he said.
Banks held steady, and Abbey National added one percent as talk lingered that it could be a take-over target.
Legal & General and Friends Provident each rose over two percent on hopes the government might raise the ceiling on fees insurers can charge on savings products, potentially brightening insurers' new business prospects.
But Provident Financial fell three percent after the household lender said it expected a government watchdog to examine the level of competition in the sector. Midcap rival Cattles lost 5.2 percent on the news.
Cigarette maker Imperial Tobacco fell 2.2 percent after investment bank Credit Suisse First Boston said it expected short-term weakness after a decline in German shipment volumes. Rival Gallaher shed 1.3 percent.