U.K. stocks broke a string of advances Thursday, with bank shares driven down as Federal Reserve officials wrestle over whether to keep raising U.S. interest rates this year, while retail stocks fell after British retail sales showed only modest growth.

The FTSE 100 UKX, -0.70% closed down 0.6% at 7,387.87, and financial shares lost the most. Thursday’s fall was the first for blue-chip stocks after three consecutive advances.

Stocks were in the red throughout the session as traders grappled with the prospect that the Federal Reserve may not raise interest rates again in 2017. Minutes from the Fed’s July meeting, released late Wednesday, showed officials engaged in an intense debate about the path of U.S. inflation after a run of unexpectedly low readings.

“The prospects of a December hike, which would be the third in 2017, have taken a further hit,” said Richard Perry, market analyst at Hantec Markets, in a note.

“The dollar rally that had been taking hold has subsequently started to reverse again. Markets such as dollar/yen and gold have reacted strongly, whilst it was interesting to see to see equities also stuttering despite the prospect of less stringent tightening from the Fed,” he said.

Rate debate: Bank shares fell on the ramped-up talk about a U.S. rate hike looking less imminent. Many U.K. banks have operations in the U.S. and higher interest rates can help bolster net interest margin for lenders. Shares of HSBC PLC HSBA, -2.18% HSBC, -2.03% fell 1.3%, Barclays PLC BARC, -3.10% BCS, -3.27% was off 1.7% and Lloyds Banking Group PLC LLOY, -3.86% LYG, -3.05% slumped 1.5%. Standard Chartered PLC STAN, -3.54% fell 2.7%.

Shares of miners had been mostly higher as the dovish debate at the Fed weighed on the U.S. dollar DXY, -0.12% , which can help lift dollar-denominated prices of commodities.

But shares of gold producers Fresnillo PLC FRES, +4.92% and Randgold Resources PLC UK:RRS were the only ones that finished with gains, key off rising gold prices US:GCZ7. Fresnillo closed up 3.9% and Randgold rose 1.8%.

Read: Gold marches higher as haven demand persists

In other developments Thursday, Kingfisher PLC KGF, -2.87% fell 4.1% after the home-improvement retailer posted a decline in second-quarter comparable sales in part because of continued weakness in France.

Economic data: U.K. retail sales rose a modest 0.3% in July on a month-over-month basis, just above a 0.2% estimate from a FactSet survey of economists, driven by growth only at food and household goods stores. Sales year-over-year rose 1.3%, meeting expectations.

The pound GBPUSD, +0.31% rose to an intraday high of $1.2910 after the report, but drifted back down to $1.2884. Sterling late Wednesday traded hands at $1.2891.

“What took the punch out of the report and repelled bulls further was the fact that June’s retail sales were ... revised down from 0.6% to 0.3%,” said FXTM research analyst Lukman Otunuga. “Although the volume of goods sold in July printed above expectations, the total growth was relatively soft and highlighted how the gap between inflation and wages continues to squeeze household finances.”