The FTSE 100 has taken a step back after reaching an all-time high on Tuesday, following comments from a Bank economist that dampened hopes of an imminent interest rate cut.
Earlier in the day, the FTSE 100 had peaked at 8,076.52 points, driven by a weaker pound and hopes of easing Middle East tensions, which pushed the blue-chip index to its highest ever intraday price. However, it ended the trading day up by 0.26% at 8,044.81 points.
The index's retreat was triggered by the Bank's chief economist, Huw Pill, hinting that rate cuts might be further away than initially anticipated by some analysts. Speaking in London, Mr Pill stated that while rate cuts are "somewhat closer" than last month, the economic outlook "has not changed substantially". He also cautioned about the risks of reducing rates too early.
The Bank's Monetary Policy Committee, responsible for deciding on interest rates, will make its next decision on May 9. Chris Beauchamp, chief market analyst at online trading platform IG, commented: "After yesterday's strong session the FTSE 100 might have been forgiven for running into some early selling."
"But the index was able to hit a new peak before succumbing to some profit-taking in the afternoon session, though it remains up on the day overall. BoE chief economist Huw Pill will take the blame for the weakness this afternoon, as he warned investors not to hope for rate cuts too soon, but the medium-term outlook for UK stocks continues to look brighter."
A weakened sterling helped push the exporter-heavy FTSE 100 to its new high in the morning, but the currency rose over the course of the day. The pound was up 0.66% at 1.243 US dollars at the close and was 0.29% higher at 1.162 euros at market close in London.
Europe's other major markets made modest gains. The German Dax index was up 1.58% at the close and the Cac 40 in France closed up 0.87%. Primark owner Associated British Foods was the FTSE's top riser after profits jumped more than a third at its half-year results.
Shares in the group, which also owns food brands Ovaltine and Ryvita, rose 9% to 2,731p after it posted a 37% increase in pre-tax profit to £881 million for the year ending March 2. Meanwhile, JD Sports Fashion's stock jumped 3.76% to 122.9p after it agreed a $1.08billion (£878million) deal to buy American sportswear retailer Hibbett as it pushes further into the US.
JD Sports said it would pay $87.5 (£70.90) a share for Hibbett in cash, with aims for the acquisition to give it a stronger foothold in the all-important American market. The price of oil bounced back from its multi-day decline, which was triggered by a perceived easing of tensions in the Middle East, as traders assessed the potential for more supply disruptions in the upcoming months.
A barrel of Brent crude oil rose by 0.66% to 87.62 US dollars as markets were closing in London. The biggest risers on the FTSE 100 were AB Foods, climbing 225p to 2,731p, Ocado, increasing 19.4p to 377.8p, JD Sports, rising 4.45p to 122.9p, St James's Place, gaining 12.8p to 444.2p, and Ashtead, jumping 162p to 5,724p.
The biggest fallers on the FTSE 100 were Smurfit Kappa, dropping 84p to 3,466p, Anglo American, falling 49p to 2,111p, Antofagasta, declining 46p to 2,155p, Mondi, slipping 26.5p to 1,500p, and Croda, decreasing 85p to 4,888p.