FTSE holds firm

The London market held firm today despite soaring levels of inflation raising the prospect of a further hike in interest rates.

The FTSE 100 Index overcame early losses to stand up 0.3 points at 6263.8 by mid-morning after official figures showed inflation hit 3% last month – its highest level for a decade.

It raised the prospect of a fourth rise in interest rates since August but the market brushed that threat aside with the help of further gains by Smiths Group.

Smiths followed yesterday’s rise of 11% with gains of 25p to 1119.5p today as investors continued to welcome the sale of the company’s aerospace division to General Electric for £2.5 billion.

Smiths also benefited from a promise to return cash to shareholders as well as an upgrade by UBS.

It was followed up the leaderboard by Johnson Matthey – 19p higher at 1507p - which analysts said could also become a target for GE.

But miners came under pressure on the back of lower copper prices and Xstrata fell 36p to 2292p while Lonmin was off 40p to 2908p and Rio Tinto lost 32p to 2565p.

Enterprise Inns gave up early gains despite a solid update ahead of its annual general meeting. The stock sank 8p to 1284p as investors banked profits following the rise in early trading.

Tesco was 1.5p lower at 418.25p even though the supermarket chain underlined its dominance with another strong Christmas trading performance.

Northern Foods also lost recent gains – easing more than 5% or 6.5p to 112.5p - despite reporting a solid performance in the run-up to Christmas.

And shares in Debenhams dived nearly 7% lower after underlying sales fell over the festive period. Debenhams said sales of clothes were weaker than expected and the stock slipped 12p to 171.75p.