February 13, 2018 / 5:00 PM / 4 months ago

UPDATE 1-Commodities help FTSE 100 outperform European stocks

* FTSE 100 up 0.2 pct

* Pound jumps after inflation data, weighs on dollar-earners

* TUI hits record high after Q1 update (Updates prices, adds detail)

By Kit Rees and Helen Reid

LONDON, Feb 13 (Reuters) - A recovery among commodities stocks helped Britain’s top share index outperform European peers on Tuesday, though it came under pressure from a firmer pound after some stronger-than-expected inflation data.

The blue-chip FTSE 100 index ended the day down 0.1 percent at 7,178.01 points, while mid-caps slipped 0.3 percent.

UK stocks, boosted by their strong commodities weighting, easily outperformed European benchmarks which fell 0.6 to 1.4 percent.

Sterling popped higher following the release of UK consumer price data, which showed inflation unexpectedly held close to its highest level in nearly six years in January.

“The big source of fright out there in the market is higher inflation. It’s centered in the U.S., but it’s a global phenomenon,” said Jasper Lawler, head of research at London Capital Group.

“This data coming in at a slightly faster tick than we were expecting just supports that narrative that actually global inflation is on the rise and that interest rates are probably going to have to follow suit,” Lawler added.

Trading was apprehensive as the data reignited concerns around higher inflation and rising bond yields, key drivers of the recent sell-off across global equity markets.

Last week the FTSE suffered its biggest weekly loss since the beginning of 2016, ending the week at a 13-month low.

The firmer pound hurt heavyweight international earners such as Unilever, Imperial Brands and AstraZeneca , which all fell.

Gains for mining firms helped limit losses, however, with firmer metals prices driving Glencore, Rio Tinto and BHP Billiton up 1.6 to 2.6 percent.

Shares in advertising group WPP rose 3.6 percent, in line with Publicis after the French rival agency won a multi-year contract with Daimler’s Mercedes-Benz.

Food delivery company Just Eat was a top gainer, rising 3.8 percent to a fresh record high. German rival Delivery Hero was also among top European gainers, a day after JP Morgan issued a note calling the stock a ‘top pick’ in the Internet space.

Shares in TUI ended the day up 1.2 percent, having hit a record high earlier after the travel group said summer trading was very good.

“What’s really driving the shares to fresh record highs ... is likely lower debt and improved underlying profitability,” said Mike van Dulken, head of research at Accendo Markets.

Utilities were the biggest fallers as fears of rising bond yields took their toll on the high-yielding parts of the market. Severn Trent and United Utilities fell 3.4 and 3.1 percent, with National Grid shares also down 1.6 percent.

Bank of America Merrill Lynch’s fund manager survey found a net 44 percent of European investors were underweight on utilities.

“Usually you would see people have a look at this sector, but people are just transfixed on higher bond yields so they hate the utilities, they just grind lower every day,” said a trader.

Reporting by Kit Rees; Editing by Peter Graff

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