UK markets experienced a choppy trading session on Wednesday as investor sentiment vacillated between optimism and pessimism: concerns over poor economic data releases were occasionally overshadowed by hopes that the European Central Bank (ECB) would announce new monetary policy measures on Thursday.
Investor confidence was eroded after a new survey report showed private sector activity in the eurozone contracted for a seventh straight month in August.
In the end, after a push-pull day, the FTSE 100 index edged down by 14 points, closing at 5,658. The FTSE 100 has now lost roughly 3.5% in the last two weeks. The FTSE 250 index added 17 points, closing at 11,446.
The "FTSE 100 remains in the red, although the mood has turned more upbeat during the afternoon courtesy of the ECB," said Rupert Osborne from IG Index.
"For a month now, markets have patiently awaited details of exactly how [ECB president] Mario Draghi intends to save the euro. It appears that we may now have something to work with," said Osborne. "According to ECB officials, the bank will focus solely on government bonds, with the shorter end of the curve being targeted. No explicit yield cap will be set, and the ECB will also stop buying the bonds of any nation deemed to have failed to meet set conditions. That, at least, is the current plan. Whether the Germans will agree to it is still an unknown."
The ECB is releasing its interest rate decision on Thursday afternoon, and then Draghi will speak at a press conference at 13:30 BST where he will outline his much-awaited monetary policy plans.
One specific company contributing to the downside on the London Stock Exchange on Wednesday was the beleaguered oil company, BP (BP.). Shares in the company fell by 3% after the US Department of Justice issued a scathing memo accusing the company of gross negligence related to its Gulf of Mexico oil spill.
"The timing of the latest memo indicates that the US government may be growing frustrated about its inability to reach a settlement with the parties and may be gearing up for a trial, which is now set for January 2013," said Morningstar analyst Stephen Simko.
With reporting from Gazala Parveen, an assistant site editor at Morningstar.