London stocks had pushed into the green by midday on Wednesday, helped along by a weaker pound as investors mulled stagnant inflation data and looked ahead to the latest policy announcement from the Federal Reserve.
The FTSE 100 was up 0.4% at 7,736.48 as the pound lost further ground after data showed that UK inflation held steady in May, weakening the case for the Bank of England to hike interest rates in August. Sterling was trading down 0.4% versus the euro at 1.338 and 0.3% against the dollar
Inflation was unchanged at 2.4% in May, according to the Office for National Statistics. Some analysts had been expecting the rate to be steady while others had pencilled in an increase to 2.5%. The rate of increase remained above the BoE's 2% target but followed a series of mixed signals about the state of the UK economy.
The BoE's monetary policy committee is weighing up whether to increase interest rates at its August meeting after holding off from an expected rise in May. The pound fell in response to the inflation figures, suggesting markets believe the chances of a rate rise have weakened.
Prices in May were supported by the rising cost of motor fuel and air and sea fares, which were affected by the timing of Easter. These upward pressures were partly offset by lower prices for games, domestic energy, food, non-alcoholic drink and furniture.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures showed underlying inflation was weak. Though CPI will probably rise in June, boosted by energy tariff increases, the downward trend is likely to return in the third quarter, he argued.
"With GDP growth looking sluggish, wages still failing to gather momentum and Brexit negotiations set to reach a climax towards the end of this year, the MPC now looks set to wait until 2019 before raising interest rates again," Tombs said.
Still to come, the Fed is due to make its latest policy announcement after the close of UK markets, at 1900 BST. With market participants expecting the central bank to hike rates by 25 basis points for the second time this year, the main event will be the quarterly economic projections and the press conference with chair Jerome Powell.
Oanda analyst Craig Erlam said: "The central bank has previously indicated that three rate hikes this year is likely but with the inflation picking up, the economy performing well and tax reforms having added an additional stimulus this year, a fourth could be on the cards.
"It will therefore be very interesting to see whether this is being factored into the economic projections yet or if policy makers still intend to take their time raising rates. There have already been suggestions that they will be willing to tolerate above target inflation but if prices are rising faster than anticipated - CPI inflation rose 2.8% in May, core CPI 2.2% - we should get an idea of just how much they will accept."
In corporate news, Dixons Carphone slumped after revealing that the card data of 5.9m of its customers has been accessed by hackers, with records on 1.2m customers containing non-financial personal data also accessed.
Just Eat tumbled after rival Deliveroo said it will allow restaurants to use their own riders for orders made through its takeaway food app, upping its available outlets by 50%. Until now, only restaurants that agreed to use Deliveroo's riders could be listed on the app.
Glencore was on the way up after saying that its Katanga Mining subsidiary has settled a legal dispute with its state-owned joint venture partner in Democratic Republic of the Congo that threatened to dissolve Katanga's DRC operating subsidiary Kamoto Copper Company.
WPP was also higher despite the advertising giant's annual shareholder meeting later in the day expected to see some tough questions for the board after the departure of boss Martin Sorrell shrouded the company in controversy. Chairman Roberto Quarta is under pressure, with shareholder advisory groups Glass Lewis and PIRC recommending against his re-election because of the lack of disclosure around the Sorrell investigation.
Stobart Group was a high riser as it said Ryanair will open a new base at its London Southend airport.
Outside the FTSE 350, British luxury brand Mulberry slid after it posted a drop in annual profit on the back of start-up costs for its operations in Asia and announced a new business agreement in South Korea.
Tate & Lyle was weaker after Jefferies downgraded the stock to 'hold', but TalkTalk surged on an upgrade to 'buy' at Bank of America Merrill Lynch.
FTSE 100 (UKX) 7,736.48 0.42%
FTSE 250 (MCX) 21,292.28 0.24%
techMARK (TASX) 3,560.19 0.27%
FTSE 100 - Risers
Evraz (EVR) 566.80p 2.72%
International Consolidated Airlines Group SA (CDI) (IAG) 718.00p 2.66%
Glencore (GLEN) 393.75p 2.65%
Sage Group (SGE) 688.80p 2.10%
easyJet (EZJ) 1,788.50p 2.05%
Hargreaves Lansdown (HL.) 2,054.00p 1.94%
Old Mutual (OML) 226.70p 1.89%
Burberry Group (BRBY) 2,140.00p 1.61%
Johnson Matthey (JMAT) 3,843.00p 1.48%
Ferguson (FERG) 6,075.00p 1.47%
FTSE 100 - Fallers
Just Eat (JE.) 769.60p -9.46%
Sky (SKY) 1,341.50p -1.22%
BT Group (BT.A) 206.42p -0.95%
Marks & Spencer Group (MKS) 301.60p -0.89%
Standard Chartered (STAN) 731.50p -0.72%
Anglo American (AAL) 1,799.60p -0.72%
Rolls-Royce Holdings (RR.) 835.40p -0.71%
Vodafone Group (VOD) 187.16p -0.71%
Royal Bank of Scotland Group (RBS) 264.05p -0.62%
Next (NXT) 6,168.00p -0.55%
FTSE 250 - Risers
Stobart Group Ltd. (STOB) 258.69p 9.38%
TalkTalk Telecom Group (TALK) 125.90p 7.06%
Games Workshop Group (GAW) 3,019.80p 3.42%
Charter Court Financial Services Group (CCFS) 337.53p 3.23%
Barr (A.G.) (BAG) 695.00p 2.51%
Hikma Pharmaceuticals (HIK) 1,428.50p 2.29%
Inmarsat (ISAT) 526.00p 2.10%
Equiniti Group (EQN) 255.50p 2.00%
FDM Group (Holdings) (FDM) 1,095.60p 1.82%
Victrex plc (VCT) 3,096.00p 1.71%
FTSE 250 - Fallers
Superdry (SDRY) 1,154.90p -5.34%
Alfa Financial Software Holdings (ALFA) 185.20p -4.04%
Dixons Carphone (DC.) 190.55p -3.64%
Tate & Lyle (TATE) 654.20p -2.36%
Domino's Pizza Group (DOM) 353.20p -2.27%
Lancashire Holdings Limited (LRE) 574.50p -2.13%
Greencore Group (GNC) 181.55p -1.89%
Contour Global (GLO) 226.00p -1.74%
esure Group (ESUR) 218.12p -1.57%
Ted Baker (TED) 2,310.00p -1.53%