Pound surges to three-week high after inflation tops 2% target
London's top flight index gave up its winning streak as the pound surged to a three-week high after inflation exceeded the Bank of England's 2% target.
The FTSE 100 Index closed down 51.47 points to 7,378.34, dragged lower by the mining giants which dominated the biggest fallers on the market.
BHP Billiton dropped 53p to 1,283.5p, while Rio Tinto and Glencore fell by 143p to 3,327p and 14.6p to 330.1p respectively.
The London market has risen for the past four sessions on the bounce, notching up three record closes along the way.
It follows the FTSE 100's remarkable rally over the festive season when it closed up for 14 consecutive working days between December 22 and January 13.
However, the resurgent pound was putting stocks under pressure, with sterling jumping 1% against the US dollar at 1.248 - its highest level since February 23.
The pound was also 0.2% higher versus the euro at 1.154.
The UK currency climbed after the inflation announcement, which saw Consumer Price Index (CPI) record its biggest rise since September 2013.
The Office for National Statistics (ONS) said CPI reached a higher-than-expected 2.3% last month, up from 1.8% in January.
The move is the first above-target rise since November 2013 and will put pressure on the Bank's Monetary Policy Committee (MPC) to hike interest rates beyond 0.25% this year.
Connor Campbell, financial analyst at Spreadex, said: "The pound's post-inflation increase boost continued into the afternoon, creating a heavier and heavier weight for the FTSE.
"It will be now interesting to see whether the pound can maintain these gains as attention shifts to next week's triggering of Article 50, or whether its current highs merely give it more room to fall."
Across Europe, Germany's Dax was down 0.7% and the Cac 40 in France was 0.2% lower.
On the oil markets, the price of Brent crude was down 0.7% at 51.24 US dollars a barrel, with traders left unconvinced by the possibility of OPEC extending output cuts beyond June.
In UK stocks, Barclays rose after higher inflation raised the prospect of an interest rate hike in the coming months.
A jump in the cost of borrowing would bolster profitability at Britain's biggest banks, which have struggled under the weight of record low interest rates.
Shares in Barclays were up 1.7p to 230p.
Distribution and outsourcing firm Bunzl was among the biggest risers following a broker upgrade to overweight from equal weight.
Shares rose more than 1%, or 30p to 2,365p, after Barclays said the company was well positioned to deliver organic and acquisition growth.
Away from the top tier, Bellway Housing lifted 9p to 2,837p after posting a healthy rise in half-year profits.
The Newcastle-based group said pre-tax profits rose 9.3% to £247.6 million in the six months ended January 31, while revenue was up 5.9% to £1.1 billion.
The biggest risers on the FTSE 100 Index were Fresnillo up 25p to 1,553p, Bunzl up 30p to 2,365p, National Grid up 9.9p to 1,000.5p, Admiral Group up 15p to 1,992p.
The biggest fallers on the FTSE 100 Index were Glencore down 14.6p to 330.1p, Rio Tinto down 143p to 3,327p, BHP Billiton down 53p to 1,283.5p, Anglo American down 32p to 1,247p.