TUESDAY MARKET CLOSE: FTSE up as case for rate hike weakens

Falling inflation in the UK helped the FTSE 100 Index jump almost 1 per cent as the case for low interest rates hardened.

The Footsie was up 60.43 points at 6,796.43, also helped by a fresh round of stimulus from the Bank of Japan and speculation that the eurozone’s own problem with low inflation would have to be addressed.

Alex Conroy, financial trader at Spreadex, said: “Investors are positioning themselves for the increasing possibility of a European version of quantitative easing in response to the growing threat of deflation.”

Scottish Gas-parent Centrica endured more share losses after broker UBS slapped a “sell” rating on the firm just two days before its annual results, due tomorrow.

The blue chip stock, which has lost a fifth of its value since October, dropped more than 3 per cent at one stage but later clawed back some of the decline, closing 4p lower at 314.4p.

Alongside Centrica, the FTSE 100 fallers’ board featured InterContinental Hotels after the company posted a 10 per cent rise in operating profits to $668 million (£400m) for last year.

Shares have enjoyed a good run in recent months, but were off 3 per cent or 66p at 1,981p on disappointment at the failure of the company to announce plans to return cash to shareholders.

Banking stocks were among the biggest gainers of the session, with Royal Bank of Scotland up 8.4p to 360.2p and Barclays ahead 5.3p to 261.3p despite more negative headlines regarding its involvement in the Libor-rigging scandal. Barclays was boosted by an upgrade from broker Jefferies.

And BHP Billiton added 37p to 1,949p after the world’s biggest mining firm reported a better-than-expected half-year profit of $8.1 billion as cost cuts offset lower commodity prices.