London midday: Stocks sink after surprise dip in Eurozone inflation

- BT lifts earnings outlook for full year- Eurozone CPI raises deflation risks- German retail sales fall- FTSE 100 down three per cent on the weektechMARK 2,759.01 -0.77%FTSE 100 6,463.74 -1.14%FTSE 250 15,621.08 -0.51%After a subdued start, UK markets sank sharply into the red on Friday morning after a surprise drop in Eurozone inflation sparked concerns over deflation risks in the single-currency region. The FTSE 100 was down 1.1% at 6,464 by midday, trading at levels not seen since December 13th when it closed at 6,439.96. Despite Mario Draghi's insistence earlier this week that last month's fall in inflation was just a blip, consumer prices in the Eurozone rose by a smaller-than-expected rate in January, putting pressure on the European Central Bank (ECB) President to act at the next policy meeting.The annual change in Eurozone consumer price inflation eased back to a four-year low of 0.7% this month, from 0.8% the month before. Analysts had expected a slight pick-up to 0.9%."This is the level that prompted the ECB to cut interest rates to record lows of 0.25% back in November, and therefore speculation will be rife about how they will respond at the meeting next week," said Market Analyst Craig Erlam from Alpari."The problem the ECB now faces is that any interest rate cut to, say, 0.1%, will probably have minimal impact, which means they will be forced to consider more unconventional measures," he said.Ongoing concerns about emerging markets and a further reduction of stimulus in the States have weighed heavily on markets this week as traders scaled back their appetite for risk. As it stands, London's benchmark index is now more than 3% lower than last Friday's closing price.Adding to the selling pressure this morning was a surprise 2.5% drop in German retail sales in December, compared with a revised 0.9% gain the month before. Analysts had expected sales to rise by 0.2% from November.BT ups full-year guidanceTelecoms titan BT was a high riser this morning after raising its earnings outlook for the year as its broadband fibre business and new BT Sport channels helped it to boost profits by 8% in the third quarter.Next, which announced on January 3rd that it would pay a special dividend of 50p per share to shareholders on February 3rd, said it would make a further special dividend payment of 50p on May 1st following a good Christmas.Drinks group Diageo was extending losses made yesterday when it disappointed investors with worse-than-expected first-half results after a slowdown in emerging markets. Goldman Sachs downgraded its rating on the stock to 'neutral' this morning and slashed its target price from 2,660p to 1,996p. SABMiller and Coca-Cola HBC were also lower.Goldman, however, gave tobacco giant Imperial a lift this morning after upgrading its stance to 'conviction buy' and raising its target from 2,545p to 2,840p.Asset manager Schroders was also performing well after Berenberg lifted the stock to 'buy' and hiked its target from 2,550p to 3,050p.The Paragon Group of Companies saw its share price surge after saying that new buy-to-let lending increased "significantly" during its first quarter and operating profits were 13.5% ahead of last year.Pizza delivery chain Domino's was higher after saying Senior Non-Executive Director David Wild will be acting as Chief Executive until a replacement for Lance Batchelor is found. Credit Suisse also upgraded the stock to 'outperform' today.Web and technology business Premier Farnell said that sales had picked up in the second half of the year but shares fell sharply after the firm warned that operating margins would be flat next year. FTSE 100 - RisersBT Group (BT.A) 380.50p +2.59%Imperial Tobacco Group (IMT) 2,229.00p +2.15%Fresnillo (FRES) 776.00p +1.17%BG Group (BG.) 1,019.00p +1.04%British American Tobacco (BATS) 2,911.50p +0.76%Randgold Resources Ltd. (RRS) 4,158.00p +0.39%National Grid (NG.) 784.50p +0.32%Burberry Group (BRBY) 1,415.00p +0.28%Severn Trent (SVT) 1,735.00p +0.17%SSE (SSE) 1,323.00p +0.15%FTSE 100 - FallersCoca-Cola HBC AG (CDI) (CCH) 1,611.00p -3.36%SABMiller (SAB) 2,663.00p -3.27%Diageo (DGE) 1,767.50p -2.88%Associated British Foods (ABF) 2,657.00p -2.82%Tullow Oil (TLW) 789.00p -2.77%RSA Insurance Group (RSA) 96.95p -2.71%Royal Bank of Scotland Group (RBS) 338.00p -2.71%ITV (ITV) 196.70p -2.53%Old Mutual (OML) 169.60p -2.47%Capita (CPI) 976.50p -2.45%FTSE 250 - RisersKeller Group (KLR) 1,194.00p +4.74%Paragon Group Of Companies (PAG) 362.80p +4.28%Domino's Pizza Group (DOM) 534.50p +3.99%Brewin Dolphin Holdings (BRW) 304.20p +3.01%Perform Group (PER) 241.80p +2.89%NMC Health (NMC) 489.40p +2.82%Kazakhmys (KAZ) 175.90p +2.57%Serco Group (SRP) 434.00p +2.55%Dechra Pharmaceuticals (DPH) 697.00p +2.50%African Barrick Gold (ABG) 221.40p +2.22%FTSE 250 - FallersPremier Farnell (PFL) 214.90p -8.20%Imagination Technologies Group (IMG) 169.50p -4.94%Intu Properties (INTU) 311.90p -4.33%Vedanta Resources (VED) 801.50p -4.30%Ferrexpo (FXPO) 150.80p -3.70%Lonmin (LMI) 300.60p -3.34%Ocado Group (OCDO) 517.50p -3.09%Essar Energy (ESSR) 58.60p -3.06%Spectris (SXS) 2,204.00p -2.31%Rotork (ROR) 2,450.00p -2.20%BC