London stocks slid on Thursday as U.S. Treasury yields climbed after the Federal Reserve signalled elevated interest rates for longer, while investors braced for the Bank of England's (BoE) key monetary policy decision due later in the day.
The blue-chip FTSE 100 index (.FTSE) was down 0.5% by 0844 GMT.
The Fed held its interest rates steady on Wednesday, but stiffened a hawkish monetary policy stance that its officials increasingly believe can succeed in combating inflation.
Asian stocks tracked the lacklustre mood in U.S. peers on Wednesday after the Fed revised its economic projections.
The BoE on Thursday will announce whether it is halting a run of interest rate hikes that stretches back to December 2021, after data released on Wednesday showed a surprise fall in August inflation.
Traders are betting on a 43% chance for the BoE to hold rates steady at 5.25%.
The sterling has been losing steam against the U.S. dollar and hit its lowest levels since early April on Thursday.
"If sterling continues to fall – which is the most plausible outcome if the BoE softens its policy stance more than necessary today - inflation in Britain will become harder to contain," Ipek Ozkardeskaya, senior analyst, Swissquote Bank said in a note.
"As a result, a - maybe - last 25-basis point rate hike is on today’s menu," Ozkardeskaya added.
Also pulling down the benchmark index was a 2.0% slump in industrial miners (.FTNMX551020), as greenback-priced metals declined on a firmer U.S. dollar.
Mid-cap stocks (.FTMC) dipped 0.6%, dragged by shares of trading platform IG Group (IGG.L) and homebuilders Crest Nicholson (CRST.L) and Redrow (RDW.L) as they fell between 4% and 5% on ex-dividend trading.
Next (NXT.L) rose 1.9% after the clothing retailer raised its full-year profit outlook for the third time in four months.
JD Sports Fashion (JD.L) climbed nearly 7.7% to the top of FTSE 100 after the sportswear retailer forecast a higher annual profit.
The broader retailers' index (.FTNMX404010) led the sectoral gains with a 1.5% jump.
