Britain's main share index dipped slightly on Wednesday, dawdling on the eve of a key interest rate verdict as depressed banks overrode an energy sector fired up by stellar oil prices. The FTSE 100 ended down 6.3 points, or 0.1 percent, at 5,983.9, as shares slipped across Europe and the United States.
UK banks all closed weaker as investors pointed to lingering credit fears, lower-than-expected housing data the day before and negative broker comment on the sector.
HBOS, the biggest loser in the sector, shed 4.2 percent after Credit Suisse slashed its price target on the stock to 565 pence from 890 pence with an "underperform" rating. Barclays dropped 1.5 percent and Royal Bank of Scotland fell 1.3 percent.
With little corporate news for investors to chew on, the market sat in waiting for the Bank of England's interest-rate verdict due on Thursday, with a Reuters poll indicating a 25-basis-point cut to 5 percent.
Across the Atlantic, US stocks fell as investors worried about the outlook for corporate profits after United Parcel Service Inc (UPS) forecast an earnings shortfall. "There's certainly not much to smile about across the pond with that downbeat corporate news dominating from the likes of UPS," Paul Chesterton, senior sales trader at CMC Markets said in a note.
"It's not easy to see how the market can continue to keep finding upward momentum when the global economy remains in such a precarious state," he added. Earnings growth for FTSE 100 companies for 2008 is expected to rise to 9.3 percent from 6.9 percent estimated two weeks ago, Reuters Estimates said.
Oil shares stole the show on the upside, with oil major BP up 1.6 percent and its rival Royal Dutch Shell gaining 0.9 percent. US crude oil prices climbed above $111 a barrel. Oil's leap, within reach of a record high, came after a US government report showed a surprise drop in inventories in the world's top fuel consumer.
"Look for those record oil prices to squeeze any hope of economic recovery," CMC's Chesterton added. Prudential, Pearson, Hammerson and Admiral Group all traded in negative territory after going ex-dividend. BG Group also traded ex-dividend, but rose 3.3 percent thanks to the booming oil price.
British Airways, sensitive to the crude price, fell 3.9 percent. Among midcaps, Signet Group tumbled 8.9 percent after the world's biggest speciality jewellery retailer unveiled a 16.8 percent fall in annual profit and said its outlook remained very challenging.