LONDON'S premier index drifted lower on Tuesday as a choppy session for global markets left US and European indexes in the red.
The FTSE 100 Index closed down 9.05 points to 7,168.01, as investors struck a cautious tone following a string of sell-offs in recent sessions sparked by the prospect of interest rate rises across the globe.
Concerns that rising inflation may cause central banks to tighten monetary policy, particularly in the United States, has left investors spooked, leading to volatile swings and trillions of pounds to be wiped off global markets.
On Wall Street, the Dow Jones Industrial Average was off 0.5 per cent and the S&P 500 endured a 0.3 per cent fall.
European markets were also suffering, with Germany's Dax and the Cac 40 in France down 0.7 per cent and 0.6 per cent respectively.
In currency, sterling was 0.5 per cent higher versus the US dollar as inflation unexpectedly held steady at three per cent in December, ratcheting up pressure on the Bank of England to hike rates as soon as May.
While the ONS reported signs of weaker price rises for fuel and food in January, those were offset by a shallower fall in leisure costs.
Clothing prices helped to prop up the inflation figure despite having fallen 3.7 per cent month on month, which marked a weaker drop compared with the 4.3 per cent fall during the same period a year earlier.
Despite boosting its performance against the greenback, the pound was down 0.2 per cent versus the euro at 1.123.
Fiona Cincotta, City Index market analyst, said: "The pound spiked even further northwards after inflation figures beat expectations, however the effects were short-lived.
"A higher inflation reading, coming to a back drop of a more hawkish sounding BoE would normally send the pound soaring.
"The fact that it didn't, suggests that market participants are at least cautious of the ability of the UK economy to sustain sooner and faster rate rises in the face of Brexit uncertainties."
The price of oil shifted south as traders digested predictions from the International Energy Agency suggesting record US production could cause output to outstrip a potential rise in demand. Brent crude was down 0.3 per cent to $62.46.
In UK equities, the sun was shining on travel stocks as holiday giant TUI narrowed its losses during a first quarter.
Shares in the group rose by more than one per cent, or 19.5p to 1,614p, after it saw a "resilient" demand for its holidays from UK customers, despite hiking winter travel prices to make up for the weak pound.
Pre-tax losses narrowed from €103.3 million (£91.8m) to €72.5m (£64.4m) for the period.
On the second tier, shares in Pendragon surged more than 11 per cent despite full-year profits slumping after a slowdown in new vehicle sales.
The firm was up 2.5p to 23.4p, as it booked a near 20 per cent fall in pre-tax profits to £60.4m in 2017 as new vehicle revenue fell 4.9 per cent.
Pendragon pointed to a "challenging economic environment and lower consumer confidence", particularly in the third quarter.
However, investors saw through the financial woes after the group hiked its dividend for 2017.
The biggest risers on the FTSE 100 Index were Just Eat up 30.80p to 853.2p, WPP up 46p to 1,335.5p, Glencore up 9.10p to 375.8p, Evraz up 8.30p to 360.6p.
The biggest fallers were Severn Trent down 60.50p to 1,725.5p, United Utilities down 21.20p to 663.6p, Hargreaves Lansdown down 44p to 1,640.5p, RELX down 34.5p to 1,455p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here