London markets drifted into the red as traders turned their focus to Federal Reserve boss Jerome Powell as he gave Wall Street a shot in the arm with a soft approach to inflation.
European sentiment remained strained throughout the session after Mr Powell delivered his new approach to monetary policy, saying he will tolerate inflation rising above 2% for short periods of time.
The FTSE 100 closed 45.61 points lower at 5,999.99 at the end of trading on Thursday.
David Madden, market analyst at CMC Markets, said: “Stocks are in the red after the much-awaited update from Jerome Powell.
“The Fed has been operating an extremely loose monetary policy since the pandemic set in, and inflation is on the rise so it seems the bank is keen to drive ahead with a loose policy without the constraints of changing their strategy on account of inflation.
“There hasn’t been a particularly positive reaction to Powell’s update in Europe, even though it seems as if the Fed has essentially left the door open to an extremely aggressive policy.”
The Dow Jones nevertheless pushed higher after the Fed chief’s approach paved the way for years of more pro-growth policies.
In Europe, the major markets closed in the red after the US economy also reported a 31.7% slump in the second quarter of 2020.
The German Dax decreased by 0.71%, while the French Cac moved 0.64% lower.
Meanwhile, sterling was broadly flat following a fairly subdued day for economic updates in London.
The pound fell 0.03% versus the US dollar at 1.320 and was up 0.08% against the euro at 1.117.
Travel companies had a rare uplift as airline operators welcomed a dip in the price of oil.
In company news, Rolls-Royce dipped as it plunged to a record £5.4 billion half-year loss after the pandemic sent demand for air travel slumping.
The group now plans to sell off parts of its business to raise more than £2 billion, on top of the biggest ever shake-up of its civil aerospace arm that has already cost 4,000 jobs since May alone.
Shares in the company closed 3p lower at 250p on Thursday.
Paddy Power and Betfair owner Flutter Entertainment also finished in the red following a 70% drop in pre-tax profit to £24 million in the first half of the financial year.
Revenue jumped 49% to £1.52 billion as the company integrated its approximately £10 billion acquisition of The Stars Group. Flutter closed 105p lower at 12,475p.
Advertising giant WPP jumped in value despite losing nearly £2.6 billion in the first six months of the year, as it surpassed a dire set of forecasts. It was 40.4p higher at 664.4p at the close.
The price of oil slipped after it appeared that Hurricane Laura has avoided major oil infrastructure. Energy prices had jumped earlier in the weeks amid reports the weather could weigh on supply.
The price of a barrel of Brent crude oil decreased by 0.05% to 45.2 US dollars.
The biggest risers on the FTSE 100 were WPP, up 40.4p at 664.4p, IAG, up 10p at 216p, Compass, up 52p at 1,213.5p, and ITV, up 2.2p at 61.58p.
The biggest fallers of the day were Homeserve, down 45p at 1,293p, Persimmon, down 78p at 2,612p, Johnson Matthey, down 67p at 2,374p, and CRH, down 76p at 2,877p.