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FTSE 100 Fluctuates Near Highest Level Since May 2008; Shares of RBS Gain

Most U.K. stocks fell as U.S. reports showed the cost of living in the world’s largest economy climbed more than forecast last month and first-time claims for unemployment benefits rose last week.

BAE Systems Plc declined 4.2 percent after posting full- year profit that missed analysts’ estimates. Royal Bank of Scotland Group Plc, the bank that is 83 percent government- owned, advanced 3.8 percent as Berenberg Bank and Evolution Group Plc advised buying the shares.

The benchmark FTSE 100 Index added less than 0.1 percent to 6,087.38 at the close in London as 54 stocks fell. The gauge has advanced 3.2 percent this year, bringing its rally since March 2009 to 73 percent, as investors bet that a stronger economic recovery will boost corporate earnings. The FTSE All-Share Index rose 0.1 percent today, while Ireland’s ISEQ Index lost 0.7 percent.

The U.S. consumer-price index increased 0.4 percent for a second month, exceeding the 0.3 percent median estimate of 79 economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. A separate report showed more Americans than projected filed first-time claims for unemployment insurance last week, a sign the improvement in the labor market will take time to develop.

“While a failure of inflation to abate by May might force the Bank into raising rates, this would put the U.K. in the unique position of tightening both fiscal and monetary policy at the same time -- a formula likely to drive renewed talk of recession,” said Sunil Krishnan, portfolio manager in the BlackRock Multi-Asset Client Solutions group.

The Bank of England’s inflation projections prompted economists at banks including Barclays Capital to bring forward their forecast for the first interest-rate increase this year.

Barclays Plc economist Simon Hayes said policy makers are “leaning toward a rate hike over the next few months” after the central bank published its Inflation Report in London.

The index of U.S. leading indicators rose in January for the seventh straight month, signaling the expansion will extend into this year. The Conference Board’s gauge of the outlook for the next three to six months increased 0.1 percent after rising 0.8 percent in December, the New York-based group said today.

BAE Systems, Europe’s largest defense company, slid 4.2 percent to 340.9 pence. The company forecast that revenue will fall this year as the U.K. government reduces spending. BAE also reported 2010 profit of 1.05 billion pounds ($1.7 billion), missing estimates.

Reed Elsevier Plc sank 2.2 percent to 561.5 pence as the owner of the LexisNexis database and ComputerWeekly magazine reported net income that was in line with analysts’ estimates.

RBS gained 3.8 percent to 49 pence. Evolution added the shares to its core banks buy list. Berenberg rated the shares “buy” in new coverage.

-- With assistance from Nandini Sukumar in London. Editor: Jason Carey

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net

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