* Risk aversion hits shares ahead of key rate decisions
* Losses trimmed after output data better than forecast
* Banks and commodity stocks fall
* Defensive telcos, food retailers advance
By Harpreet Bhal
LONDON, Nov 5 (Reuters) - Risk aversion ahead of key central
bank policy decisions put pressure on Britain's leading shares
around midsession on Thursday, with weakness in banks and miners
offsetting modest gains in defensive telecoms and tobacco firms.
By 1109 GMT, the FTSE 100 <> was down 0.4 percent, or
22.25 points at 5,085.64, with investors staying on the
sidelines ahead of a decision by the Bank of England on interest
rates and quantitative easing at 1200 GMT.
Miners were the biggest sector drag as metals prices
retreated across the board on the back of a strenghtening
dollar. Vedanta Resources <VED.L>, Xstrata <XTA.L>, BHP Billiton
<BLT.L>, Rio Tinto <RIO.L> and Kazakhmys <KAZ.L> fell 1.7 to 4.1
percent.
Early falls on the FTSE mirrored weakness on Wall Street
overnight as a rally in U.S. stocks lost steam after the Federal
Reserve said it would keep rates near zero for an "extended
period" and predicted a sluggish recovery. []
Analysts polled by Reuters expect the BoE to keep UK
interest rates on hold while two thirds of economists forecast
an increase of 25 billion pounds to the quantitative easing
programme bringing the total to 200 billion pounds.
"We're talking about nerves here ahead of what will be the
single most important statement from the BoE for the last three
months... and the likelihood that quantitative easing is notched
up by another 25 billion pounds or more," said Howard Wheeldon,
strategist at BGC Partners.
The European Central Bank also delivers its rate verdict on
Thursday, at 1245 GMT, with economists expecting the ECB to hold
euro zone rates steady and make no changes to its special
lending measures.
Banks were also weak with Barclays <BARC.L>, HSBC <HSBA.L>,
Lloyds Banking Group <LLOY.L>, Royal Bank of Scotland <RBS.L>
and Standard Chartered <STAN.L> shedding 0.8 to 2.9 percent,
while the shake-up in the sector from earlier in the week also
weighed on sentiment.
Energy stocks were under pressure, as crude <CLc1> fell
towards $79 a barrel. BG Group <BG.L>, BP <BP.L>, Royal Dutch
Shell <RDSa.L> and Tullow Oil <TLW.L> declined 0.4 to 0.7
percent.
Cable & Wireless <CW.L> saw the sharpest drop on the index,
7.1 percent lower, after the telecoms group revised down its
full-year earnings guidance. []
Invensys <ISYS.L> dropped 6.2 percent as weakness in orders
at its operations management division overshadowed a reiteration
that its full-year performance will beat last year's.
[]
DATA LIFTS SENTIMENT
Earlier in the session, optimism about the British economic
outlook was lifted by data showing manufacturing output rose
faster than expected in September, rebounding from August's
sharp drop. [] This led shares to trim losses.
Among the select risers were defensive plays, which
benefited from their perceived safe-bet characteristics.
Within the food retailer sector, Tesco <TSCO.L>, J Sainsbury
<SBRY.L>, and WM Morrison <MRW.L> rose 0.1 to 1.9 percent.
Marks & Spencer <MKS.L> added 0.7 percent as Deutsche Bank
upgraded its rating on the retailer to "buy", and Nomura and UBS
lifted their price targets for the firm after it posted
forecast-beating figures the previous session.
Vodafone <VOD.L> rose 1.5 percent helped by results from
Deutsche Telekom <DTEGn.DE> which showed good growth from its
mobile business.
Tobacco firms British American Tobacco <BATS.L> and Imperial
Tobacco <IMT.L> added 0.9 and 0.5 percent respectively.
(Editing by David Cowell)
