London stocks ease after recent rally; focus shifts to budget, Bank of England

By Avinash P

Oct 31 (Reuters) - British stocks edged lower on Friday, with the blue-chip FTSE 100 set to extend its fall in the previous session, as markets cooled after a record run earlier this month.

Investors were also cautious ahead of the Bank of England's monetary policy decision next month and the government's budget later in November.

The FTSE 100 .FTSE and the domestically focused FTSE 250 .FTMC were down 0.3% each, as of 1210 GMT.

Still, both indexes were on track for monthly gains, with the FTSE 100 touching record highs multiple times in October and the midcap index trading close to four-year highs.

Pharmaceuticals, financials and mining stocks were among top sectoral performers for the month, boosted also by a strong start to the earnings season from companies such as HSBC HSBA.L and GSK GSK.L.

Signs of inflation staying tame increased bets that the Bank of England could cut interest rates this year, while globally, thawing U.S.-China trade tensions and dovish monetary policy by the U.S. Federal Reserve also aided risk taking.

Investors expect no change to Britain's benchmark interest rate in November, but are pricing in a cut in December, according to data compiled by LSEG.

"More dovish sounding Bank of England, particularly in light of the upcoming budget and potential tax increases could be favourable for the FTSE," said Fiona Cincotta, senior market analyst at City Index.

Auto Trader's AUTOA.L shares dipped 3.4% after the automotive platform announced its operations chief will step down.

In company news, Fresnillo FRES.L said it has agreed to buy Canada's Probe Gold PRB.TO for C$780 million ($556 million) in cash, marking the gold miner's expansion into North American markets. Shares of the UK company inched up 1%.

On the data front, lender Nationwide said that British house prices rose in October.

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