By Francesco Canepa
LONDON (Reuters) - Britain's benchmark equity index fell for a fifth straight day on Thursday, its longest losing streak since March, as improving U.S. economic data fuelled expectations that the Federal Reserve may cut its equity-friendly stimulus programme early.
The U.S. economy grew faster than initially estimated in the third quarter, data showed, encouraging bets that unemployment and non-farm payrolls data due to be published on Friday could also beat expectations.
While stronger global growth is generally good for corporate profits, it may lead Fed chairman Ben Bernanke to advance cuts to the bank's bond purchase programme, which has driven investors out of lower-yielding bonds into equities and has helped the FTSE rise 15 percent since it was announced.
"In the very first short term, are we going to have wobbles if Bernanke starts tapering? It's entirely possible," said Simon Murphy, who manages a UK equity fund for Old Mutual Global Investors.
"The fact that we're getting strong data from the likes of the U.S. is a sign that ... we've worked through the financial crisis and we're coming out on the other side. So, from a medium term perspective, I think the UK equity market can make some further progress."
The blue-chip FTSE 100 index ended down 11.64 points, or 0.2 percent, at 6,498.33 points, closing below the psychologically important 6,500 mark for the first time since mid-October.
The FTSE has sunk nearly 5 percent from October's peak of 6,819, as robust data re-ignited speculation that the Fed could start reducing its quantitative easing (QE) programme before the end of the year.
"We're not through the 'good news is bad news' phase quite yet - and I suppose if we get a strong payroll number tomorrow, then the talk about the tapering (being announced at the December meeting) will be back on the table again," said Ian Williams, a strategist at Peel Hunt.
Positive news at home helped the mid-cap FTSE 250, which has greater exposure to Britain's domestic economy, rise 29.75 points, or 0.2 percent, to 15,157.70 points.
Chancellor George Osborne said the British economy was on track to grow by 1.4 percent this year, more than double his March forecast, and 2.4 percent next year, up from the previous estimate of 1.8 percent.
Meanwhile, the Bank of England left its monetary policy unchanged and stuck to its commitment to keep interest rates at a record low until Britain's recovery is more firmly established.
"Even with the GDP up-revisions, the UK's loss over the cycle of a quarter of a percentage point a year in potential growth may take years to claw back," Neil Williams, the chief economist at Hermes, said in a note.
"This, plus chance of more benign ... inflation in 2014, stress the importance of keeping a loose monetary stance - with the BoE right to defer any Bank rate hike."
Both the government and the Bank of England's decisions were widely expected, so market reaction was relatively muted.(Editing by Mark Heinrich and Jane Merriman)