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LONDON (Alliance News) - The FTSE 100 set a new record intraday high Tuesday, but failed to make a new closing high and snapped a six-day winning streak with energy and mining stocks again amongst the worst-performing shares after some more weak Chinese economic data.

The pound, meanwhile, fell against other major currency pairs including the US dollar, after UK inflation fell to zero for the first time in February, suggesting Britain is about to follow the eurozone into a period of deflation.

The FTSE 100 hit a new intraday record high of 7,065.08, but then lost ground and eventually ended down 0.3% at 7,019.68. The FTSE 250 did better, closing up for a tenth consecutive session at a new record of 17,579.24, a 0.2% gain. The AIM All-Share index closed up 0.8% at 721.60.

Rio Tinto, down 0.6%, Glencore, down 1.1%, and Anglo American, down 1.8%, were amongst the worst-performing stocks in the blue-chip index after data from HSBC Bank showed that activity in China's manufacturing sector contracted in March, with a PMI score of 49.2 as new orders shrank. That was down sharply from 50.7 in February and well shy of economists' forecasts for a score of 50.5.

Oil producers Royal Dutch Shell 'B', down 1.4%, BG Group, down 0.4%, and Weir Group, down 0.5%, were also amongst the worst performers, as the oil price dropped slightly after its recent rally. Brent was down 0.7% at USD55.37 a barrel when the London equity markets closed.

The FTSE 350 Mining sector index ended down 1.4%, the Oil Equipment Services sector index down 1.3% and the Oil & Gas Producers index down 1.0%.

The FTSE 100's lower close meant it underperformed its major index peers in Europe, with the DAX 30 and CAC 40 both achieving new record closing highs.

The DAX 30 in Frankurt ended up 0.9%, while the CAC 40 in Paris ended up 0.7%, buoyed by some positive eurozone data. Germany's private sector expanded at the strongest pace in eight months in March and the Eurozone's private sector grew at the fastest pace in almost four years, according to flash PMI data from Markit Economics.

Al the London equity market close, Wall Street was trading mixed, with the DJIA and S&P 500 down 0.1%, and the Nasdaq Composite up 0.2%.

The pound fell against other major currencies after UK inflation fell to zero for the first time on record in February, the Office for National Statistics said. Consumer prices remained flat in February from last year after rising 0.3% in January. Economists had expected prices to rise 0.1%. On a monthly basis, consumer prices gained 0.3%, in line with expectations. In January, prices had dropped 0.9%.

Bank of England Governor Mark Carney has previously said the central bank will not raise interest rates until inflation begins to move towards its 2.0% target. Carney said at the Treasury Select Committee at the end of February that inflation may drop below zero in the coming months, but will return to the 2.0% target within two years.

The US dollar has fallen over the past few days against most other major currencies except sterling after the Federal Reserve signalled a dovish tone at its latest policy meeting, but the greenback pushed higher Tuesday after data showed a modest uptick in US consumer prices in February. That piled more pressure on the pound-dollar exchange rate, which was trading at USD1.4863 when the London stock markets closed.

US consumer prices edged up by 0.2% in February after tumbling by 0.7% in January, the US Labor Department said, matching the consensus estimate. Core consumer prices, excluding food and energy prices, also rose by 0.2% for the second consecutive month. Economists had expected core prices to inch up by 0.1%. Year-on-year, core consumer prices rose to 1.7%, above economists' expectations of 1.6%.

"The dollar took a moment to decide what to do with this news, but the fact that core CPI (i.e. the figure not dragged down by oil’s price volatility) increased to 1.7% eventually gave the greenback the inspiration it needed to take back its losses against the euro and increase its gains against the pound," said Spreadex analyst Connor Campbell.

Analysts expect the US Fed to start raising interest rates in June or September of this year, but at a slower rate than previously expected after the comments from last week's meeting. They are less certain about when UK rates will start to rise, with some predictions that rates won't start rising until 2016. Others think the UK central bank will start to raise rates this year as long as inflation starts turning back towards its 2.0% target.

"We judge that the UK is at or close to the trough of the inflation cycle and our profile envisages a steady climb to 1.4% by end-year, helped by the sharp falls in energy prices in the second half of 2014 dropping out of the annual calculation. Such an inflation profile would encourage the MPC [BoE Monetary Policy Committee] to begin to raise the Bank rate gradually by the end of this year," said Investec analyst Philip Shaw.

International Consolidated Airlines Group was the best performer in the FTSE 100, closing up 3.5%, as Morgan Stanley raised its price target for the parent company of British Airways and Spanish airlines Iberia and Vueling to EUR9.15 from EUR7.50.

Wolseley was amongst the worst-performers in the blue-chip index, ending down 2.7%. The building materials company said its pretax profit fell by two-thirds in the first half of its financial year, to GBP103 million from GBP312 million a year earlier, as it booked a GBP245 million impairment for the DT Group business in the Nordics it bought back in 2006. It blamed challenging market conditions in the region and reduced expectations of future profitability at the business.

However, excluding that, its closely-watched trading profit from ongoing businesses rose 11% to GBP390 million, from GBP351 million, as revenue rose 8.9% to GBP6.44 billion from GBP5.91 billion and its trading margin rose 20 basis points to 6.1%.

Numis raised its price target for Wolseley to 4,150 pence from 3,400p, although it retained its Hold recommendation for the stock. The broker thinks the building materials company can maintain growth over the next few years thanks to its strong performance in the US.

In the FTSE 250, International Personal Finance was the best performer as it closed up 7.7%. Berenberg upgraded the home credit business provider to Buy from Hold, lifting its price target to 600p from 525p.

In the economic calendar Wednesday, German IFO business climate data is due at 0900 GMT, while UK BBA Mortgage approvals data is at 0930 GMT. In the US, Durable Goods orders data is at 1230 GMT, while EIA Crude Oil Stocks change is at 1430 GMT.

In the corporate calendar, Balfour Beatty, Card Factory, Moss Bros Group, Hilton Food Group, Chime Communications, Johnston Press, John Laing Group and Anglo Pacific Group all release full year results. Meanwhile, Bellway and Bowleven publish half year results. United Utilities Group and Topps Tiles issue trading statements.

By Daniel Ruiz; danielruiz@alliancenews.com

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