U.K. stocks edged lower in cautious trade on Thursday ahead of the Bank of England\'s rate decision later in the day.
The central bank is likely to lower its interest rate from a 16-year high, but it will be a very close call.
The Monetary Policy Committee is expected to trim the bank rate by 25 basis points to 5.00 percent. This would be the first reduction since the onset of the pandemic.
Meanwhile, the U.K. manufacturing sector made a positive start to the second half of 2024, with growth of output and new orders strengthening, a survey showed.
The seasonally adjusted S&P Global UK Manufacturing PMI rose to a two-year high of 52.1 in July, up from 50.9 in June and the earlier flash estimate of 51.8.
Separate data from Nationwide Building Society revealed that U.K. house prices increased for the third straight month in July, suggesting stabilization in the housing market.
House prices posted a monthly growth of 0.3 percent after rising 0.2 percent in June. This was the third consecutive increase and faster than forecast of 0.1 percent.
On a yearly basis, house price growth accelerated more-than-expected to 2.1 percent from 1.5 percent in June.
The benchmark FTSE 100 was down 17 points, or 0.2 percent, at 8,351 after rallying 1.1 percent in the previous session.
Rolls-Royce shares jumped 10 percent. The aerospace engineer raised its profit guidance and announced it would restart dividends in its results for the full year.
Medicap equipment maker Smith & Nephew rallied 6.4 percent as half-year profit beat estimates.
Energy giant Shell rose 1.4 percent after launching a $3.5 billion share buyback program.
Fashion and homewares company Next soared 8 percent after raising its guidance for the year.
Lender Barclays declined 2 percent after posting a fall in second-quarter profit.