FTSE in modest gains as UK inflation dips

The FTSE 100 made modest gains in early trading as investors awaited a key report by US Federal Reserve chairman Ben Bernanke which could open the door to new monetary stimulus measures after recent weak US data.

Bernanke will present his latest monetary policy report to Congress today and tomorrow against a background of lacklustre growth, with disappointing jobs data last week.

Meanwhile UK figures out this morning showed that inflation fell to its lowest in more than two and a half years in June helped by early summer sales of clothes and shoes.

The Office for National Statistics said annual consumer price inflation dropped to 2.4 per cent from 2.8 per cent in May - the lowest since November 2009.

Gains in energy stocks and banks provided the main underlying support for the blue chips on hopes for fresh stimulus measures.

Oil services companies Amec and Petrofac both advanced by around one per cent.

Miner Vedanta lifted by just over one per cent while drinks giant Diageo nudged up by 0.9 per cent.

Libor rate-scandal hit Barclays was the top performer among banks, rallying 1.7 per cent to make up at least some of the ground lost recently. Lloyds was up 0.3 per cent in a solid start to the session.

Miner Rio Tinto was the biggest sector faller, down 1.3 per cent, after reporting flat June quarter iron ore production compared with a year ago. BHP Billiton, also in the sector, was off by 0.2 per cent.

Meanwhile plumbing giant Wolseley was off by three per cent after it said that it was considering its options over its French business which has not been performing strongly.

National Grid retreated by 1.6 per cent having yesterday attacked the energy regulator Ofgem for moving towards limits on energy prices.

Broadcaster ITV was off by 1.6 per cent and insurer Admiral 1.3 per cent.

On the FTSE All-Share spread better IG Group dipped by one per cent after it said it had been hit by subdued markets.

Cove Energy nudged up 0.2 per cent as Thailand's PTT looked set to take over the company in a £1.2bn deal after Shell pulled out of the race.

In Asia the Nikkei closed up 0.3 per cent and the Hang Seng 1.7 per cent.