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LONDON (Alliance News) - The UK's inflation rate has fallen below the Bank of England's 2% target for the first time in more than four years Tuesday, a decrease that will support governor Mark Carney's recent prediction that the bank's interest rate won't rise for some time to come.

The consumer prices index declined to 1.9% in January, down from the central bank's 2.0% target rate in December. Economists had predicted the rate would remain at 2.0%.

The Office for National Statistics attributed the fall to lower prices for items like DVDs and attractions entrance fees, as well as lower alcohol and tobacco prices and discounted furniture prices.

The data caused the pound to extend its decline against other major currencies Tuesday, hitting a four-day low against the dollar and a six-day low against the euro.

The FTSE 100 and FTSE 250 are higher again Tuesday, with the blue-chip index threatening to mark its recent recovery by closing higher than where it started 2014 for the first time.

On an individual stock level, Intercontinental Hotels Group is the leading the fallers on the FTSE 100 after it warned of heavy spending on refurbishing its hotels this year.

The owner of hotel brands including Crowne Plaza, Holiday Inn, and Intercontinental Hotels & Resorts, reported a pretax profit of USD600 million for 2013, up from USD547 million in 2012, as revenues rose to USD1.90 billion, from USD1.84 billion. However, its net profit fell to USD372 million, down from USD537 million in 2012, as its tax bill rose to USD226 million, from USD9 million.

In its statement, the company said it is confident of achieving further growth, but analysts worried that the increased spending on refurbishment would close down hotel rooms and curtail any growth. Intercontinental said it expects to spend towards the top end of its previous USD250 million to USD350 million guidance for 2014 capital expenditure.

bwin.party digital entertainment, meanwhile, is top of the FTSE 250 gainers after a US investment manager late Monday said that it has agreed in principle to acquire a stake of about 6.1% in the online gaming company from its founders, Ruth and Russell DeLeon.

The DeLeons said last October that they would sell their stakes to allow bwin.party to get a license to operate in New Jersey in the US, refusing to apply for individual licenses themselves to protect their privacy while they went through divorce proceedings.

Discount general retailer Poundland has become the second retailer to confirm that it intends to float this year, following on from online electrical retailer AO. The two companies are set to be joined by several others, including discount retailer B&M, department store operator House of Fraser, phones retailer Phones4U, pets products retailer Pets at Home, and fashion retailer Fat Face, according to various media reports in recent months.

In political news, a crackdown on anti-government protesters in the Thai capital Bangkok has left four dead and at least 64 others injured, as the country's embattled prime minister faced corruption charges. Thousands of riot-control police carrying shields were deployed at four sites and used tear gas to clear away protesters who have been pressuring caretaker Prime Minister Yingluck Shinawatra to resign since October 31.

In Kiev, protesters broke through a police cordon in front of the Ukrainian parliament Tuesday, heightening fears that the country's anti-government demonstrations could once again turn violent. The incident came as thousands of protester started marching toward the parliament to demand constitutional reforms that would curb the powers of President Viktor Yanukovych.

Negotiators from Iran and six world powers, including Britain, have started talks in Vienna on ending the stand-off over Tehran's nuclear programme through a comprehensive agreement. Building on an interim deal that was reached in November in Geneva, the negotiators are aiming to agree on further limits to Iran's nuclear programme to rule out that it could build a nuclear weapon.

"This is the first step of the end phase; therefore, expectations must not be high," Iranian Foreign Minister Mohammad Javad Zarif said hours before the talks began.

In economic news, the Bank of Japan said it has decided to maintain aggressive monetary-easing measures to prop up the world's third-largest economy and overcome chronic deflation, after weaker-than-estimated domestic growth data was released Monday.

The central bank said Tuesday it would extend its special loan programmes for one year to encourage banks to spur lending to businesses with growth potential and support the economic recovery. The size of the fund will be doubled to 7 trillion yen (68 billion dollars) from 3.5 trillion yen.

In Europe, there were further signs of the recovery, with car registrations increasing for the fifth consecutive month in January. Demand for new passenger cars advanced 5.5% in January from the preceding year, although the annual growth rate eased notably from 13.3% increase reported in December.

The tentative nature of the European recovery was also highlighted by Germany's ZEW economic sentiment indicator, which eased to 55.7 in February, compared with expectations for a drop to 61.5 from the previous month's reading of 61.7.

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FTSE 100: up 0.5% at 6,766.98
FTSE 250: up 0.1% at 16,262.68
AIM ALL-SHARE: down 0.01% at 878.50
GBP-USD: 1.6681
EUR-USD: 1.3725
GOLD: USD1,315.92 an ounce
OIL (Brent): USD109.39 a barrel

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KEY UK CORPORATE NEWS:

FTSE 100: Anglo-Australian mining giant BHP Billiton has reported an 83% increase in profit for the first-half of fiscal 2014, aided by its cost-cutting measures that helped offset the impact of lower commodity prices. The company also increased its interim dividend by 3.5%. IMI's shares have risen again, after it followed up Monday's share consolidation with the return of cash to shareholders through payment of a C share dividend and redemption of B shares. The moves are a result of its decision to return GBP620 million in cash to shareholders from the proceeds of the sale of its beverage dispensing business.

FTSE 250: Essar Energy said production has fallen across its operations during its third quarter as planned shutdowns and maintenance hit company production rates. The India-focused energy company said throughput and production fell at both its Vadinar and Stanlow refineries and its total power generation decreased during the three month period to December 31. Ophir Energy said that drilling operations have now started on the Padouck Deep-1 well on the Ntsina Block, offshore Gabon. Construction and support services company Kier Group said it will promote Finance Director Haydn Mursell as its next chief executive, after current CEO Paul Sheffield said he intends to step down and leave the company July 1. It also said that trading remains in line with its expectations. John Wood Group said it has performed well in 2013, with strong pretax profit driven by higher revenues and margins. However it warned of a fall in profits in its engineering unit during 2014, as expected. Drax Group said its pretax profit fell significantly during 2013 as increased costs, predominantly increased carbon costs, offset higher revenues. The Paragon Group of Companies has launched a new challenger bank, making good on previous guidance that the new bank would get regulatory approval inside the second-quarter. In a statement, the consumer finance lender and buy-to-let mortgage provider said it will provide Paragon Bank with an initial GBP12.7 million in capital and will inject more over time in order to support growth. Student accommodation provider Unite Group has acquired a 1.8 acre development site on St Leonard's Street in Edinburgh, subject to planning and funding agreements, for an undisclosed fee. Bank of Georgia Holdings reported record earnings for its last financial year, with Chief Executive Irakli Gilauri attributing the 15% increase in pretax profit to the success of the company's strategic initiatives launched over the past few years, while its healthcare and insurance subsidiary is gearing up to float on a stock exchange later this year. Spirent Communications has entered into a definitive agreement to acquire the business of DAX Technologies Corp, for a cash consideration of USD37.0 million. The UK government has reappointed FirstGroup to run the Thameslink services for a further six months, bridging the gap until it creates a new super-franchise encompassing three of the current franchises. AZ Electronic Materials has reported lower profits and revenues for 2013 as it was hit by challenging trading conditions, particularly for its materials business, and the fall in the Japanese yen.

AIM: Probability shares have jumped after the group said it is to be acquired by GTECH UK Interactive in a deal valuing the company at GBP18.0 million. Shares in Clean Air Power have also risen after it received an order for 19 Genesis-EDGE Dual Fuel trucks from an unnamed distribution company in the UK in a deal worth GBP500,000. Dekeloil shares have risen after the company said oil production at its CPO extraction mill in the Ivory coast has commenced ahead of schedule. It said construction was completed ahead of schedule and on budget by Malaysian company Modipalm Engineering SDN BHD. Providence Resources is another gainer after the licence area at its Barryroe Oil Field was increased. Keywords Studios is up after it bought Babel Media for GBP5.4 million in cash and shares, a deal that steps up its growth strategy to add client numbers and penetrate markets. ANGLE shares have risen after the specialist med-tech company said it will launch its Parsortix non-invasive cancer diagnostic system at a science and medical researcher conference in Berlin this week. At the other end of the market, shares in Goldstone Resources have dropped after it said results from drilling on two sites at its Sangola joint venture project were not enough to warrant a follow-up programme.

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AFTERNOON WATCHLIST: US NY Empire State Manufacturing Index, US Redbook index, US NAHB Housing Market Index

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Wednesday's Key UK Corporate Events

Galiford Try Interim Results
Pan African Resources Interim Results
Monitise Half Year Results
AJ Mucklow Interim Results
Sports Direct International Interim Management Statement
Knot Offshore Partners Q4 Results

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Wednesday's Key Economic Events

05:00 Japan BoJ Monthly Economic Survey
09:30 UK Bank of England Minutes
09:30 UK Average Earnings
09:30 UK ILO Unemployment Rate
10:00 EU Construction Output
13:30 US Housing Starts
13:30 US Producer Price Index
17:15 US Fed's Lockhart speech
18:00 US Fed's Bullard speech
19:00 US FOMC Minutes
23:50 Japan Exports/Imports

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By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance

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