Market report: FTSE benefits from caffeine hit as inflation falls

Coffee and a promise to safeguard the Eurozone from further contagion pushed the FTSE up 0.4 per cent in early trading this morning. As a result London's blue chip index broke through the 5,500 level - a technical level seen as key for spurring further buying.

Last night European leaders at the G20 summit in Mexico spelled out their plans to create a more integrated banking system including common banking supervision and firm guarantees to repay bank depositors.

Meanwhile the UK inflation rate dropped slightly, thanks to smaller increases in food and oil prices. Britain's Office for National Statistics said the benchmark Consumer Prices Index measure fell to 2.8 per cent in May from three per cent in April.

On the markets Whitbread, the owner of Costa Coffee and Premier Inn, was by far the biggest riser after it added 8.1 per cent following a strong quarterly update. It revealed that coffee sales at its chains were up over 25 per cent year-on-year, with overall sales growth across the entire hotels and restaurant group increasing by 13.9 per cent.

Engineering firm Weir Group was close behind, adding 5.3 per cent after it reaffirmed its full-year guidance and a strong medium-term outlook.

Miners Antofagasta and Evraz both gained more than two per cent while ARM Holdings, which designs processors for Apple products jumped 2.3 per cent.

Banks were largely unchanged, with Barclays off 0.4 per cent, Lloyds down 0.2 per cent and RBS down 0.5 per cent. HSBC once again bucked the trend and gained 0.8 per cent.

Unilever was the worst-performing FTSE 100 stock, falling 2.4 per cent after French rival Danone issued a profit warning. Other consumer firms such as Tate & Lyle and Diageo fell by more than one per cent while Reckitt Benckiser, owner of Dettol and Strepsils, lost 1.7 per cent

In the FTSE 250 Argos owner Home Retail gained an enormous 16.6 per cent after announcing that it had slowed the sales decline at its flagship chain.

In Asia Tokyo's Nikkei lost most of yesterday's gains and closed down 0.8 per cent. The Hang Seng was off 0.1 per cent.