By Pranav Kashyap and Shubham Batra
(Reuters) -London stocks struggled for direction on Thursday as investors turned cautious ahead of the Bank of England's interest rate decision later in the day, while energy shares gave a boost to the benchmark index.
The blue-chip FTSE 100 was up 0.1% at 8,361.22 points. The mid-cap FTSE 250 was flat.
"There's this caution of let's just wait and see what the BoE has to say in order to take the next step and potentially move higher if we have a more dovish sounding central bank," Fiona Cincotta, senior financial markets analyst at City Index said.
The pound slipped against the U.S. dollar and was last at $1.2472 while the UK's benchmark 10-year gilt yield was at 4.181% ahead of the decision.
HSBC Holdings (LON:HSBA) was the biggest drag on FTSE 100 as it traded ex-dividend. However, most other big banks listed on the benchmark index were trading higher.
"Banks are at the upper end on the leaderboard of the FTSE and that's saying the market is expecting a slightly more dovish tilt from the central bank," Cincotta said.
Investors avoided big bets ahead of the BoE's interest rate decision due at 1100 GMT, where the central bank is widely expected to keep borrowing costs steady but the focus will be on whether policymakers deliver any groundwork for loosening policy.
Markets are currently pricing in a 50-50 chance of a June rate cut, and have priced in a cut in August.
Oil stocks rose 0.6%, keeping the FTSE 100 afloat as oil prices gained due falling U.S. crude inventories and an increase in Chinese imports last month. [O/R]
3i (LON:III) Group was one of the bottom performers, falling 3.5% after posting full-year results.
IMI (LON:IMI) Plc advanced 0.7% after the specialised engineering firm confirmed its full-year guidance.
BAE Systems (LON:BAES) rose 0.8% after the defence firm said it was on track to meet guidance for higher earnings and forecast a "further positive momentum".