LONDON MARKETS: FTSE 100 Clings To Record, But Centrica Shares Lag

By Carla Mozee, MarketWatch

Inflation rate flat in February

LONDON (MarketWatch) -- U.K. stocks clung to record levels Tuesday, with consumer-related shares advancing as data showed U.K. consumer prices were flat on an annual basis for the first time in more than five decades.

But the benchmark FTSE 100's gain was capped in part by losses for British Gas's parent company Centrica PLC following a ratings downgrade.

The FTSE 100 rose 0.1% to 7,042.95, led by the consumer-goods and services sectors. The index on Monday (http://www.marketwatch.com/story/ftse-100-pulls-back-from-record-high-2015-03-23) notched a new record high, at 7,037.67.

On Tuesday, shares of British Airways parent company International Consolidated Airlines Group PLC picked up 1.9%. Luxury-goods maker Burberry Group PLC rose 1.2% as did retailer Sports Direct International PLC .

The Office for National Statistics said the annual inflation rate was flat in February. That marked the weakest annual inflation rate recorded in historical estimates since March 1960 (http://www.marketwatch.com/story/uk-inflation-rate-falls-to-zero-in-february-2015-03-24), and the first time prices haven't risen since official records began in 1989. The flat reading stemmed from a drop in prices in oil, fuels as well as food.

The pound (GBPUSD) fell against the dollar after the data, fetching $1.4909 compared with $1.4954 late Monday.

"The Bank of England have said that until the inflation situation improves, and the numbers start to show signs that they will return to the 2% target rate within the medium term, there will be no intention to raise interest rates," said James Hughes, chief market analyst at eToro, in a note Tuesday.

On the bottom end of the FTSE 100, shares of Centrica fell 1.2% after Deutsche Bank downgraded the parent firm of British Gas to hold from sell, citing risk from the U.K. general election in May.

Wolseley PLC shares fell 3.3%, after the company swung to an interim half-year net loss of 58 million pounds (http://www.marketwatch.com/story/wolseley-falls-to-net-loss-but-lifts-dividend-2015-03-24) ($86.8 million). But the heating and plumbing products supplier also raised its dividend by 10% to 30.25 pence a share.

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