By Carla Mozee, MarketWatch

Inflation rate flat in February

LONDON (MarketWatch) -- A run at fresh record high for U.K.'s blue-chip stocks fell short Tuesday, with utility shares among those finishing lower in the wake of a downgrade for the parent company of British Gas.

The FTSE 100 fell 0.3% to 7,019.68, driven into the red shortly before the session closed. Energy and mining shares finished lower, with iron ore producer Rio Tinto PLC losing 2%.

Also among the worst performers were shares of Associated British Foods PLC . They fell 2.9% as Credit Suisse cited continued weakness in the euro as reason for cutting its earnings estimates for ABF by 3% this year, and by 8% next year. ABF is behind the Primark retail chain and runs sugar operations.

The FTSE 100 had earlier been in record territory, led by the consumer-goods and services sectors as inflation data appeared encouraging for the prospects of spending by British consumers. The index on Monday (http://www.marketwatch.com/story/ftse-100-pulls-back-from-record-high-2015-03-23) notched a record high at 7,037.67.

Travel-related shares ended mostly higher on Tuesday. British Airways parent company International Consolidated Airlines Group PLC rose 3.6% and EasyJet PLC tacked on 0.9%.

Inflation: The Office for National Statistics said the annual inflation rate was flat in February. That marked the weakest annual inflation rate recorded in historical estimates since March 1960 (http://www.marketwatch.com/story/uk-inflation-rate-falls-to-zero-in-february-2015-03-24), and the first time prices haven't risen since official records began in 1989. The flat reading stemmed from a drop in prices in oil, fuels as well as food.

The pound (GBPUSD) fell against the dollar after the data, fetching $1.4875 compared with $1.4954 late Monday.

"The Bank of England has said that until the inflation situation improves, and the numbers start to show signs that they will return to the 2% target rate within the medium term, there will be no intention to raise interest rates," said James Hughes, chief market analyst at eToro, in a note Tuesday.

There's still the potential for "a small but temporary negative" reading in consumer price inflation in March, Timo del Carpio, European economist at RBC Capital Markets, said in a report. "In part this reflects our view that it will take a few more months yet for recent announcements of gas-price cuts by utility companies to fully feed through to the data."

Utilities: From the utilities front, shares of Centrica fell 0.9% after Deutsche Bank downgraded the parent firm of British Gas to hold from sell, citing risk from the U.K. general election in May, the outcome of which is widely considered too close to call.

Centrica shares looked as if they were pricing in a win by the Conservative Party, but they "could be worth at least 20% less" under a government led by the Labour Party than one by the Conservatives, said Deutsche Bank. The valuation gap "could be much bigger given that Labour leader Ed Miliband's mooted 10% energy retail price cut would wipe out Centrica's group earnings."

In the utility group, SSE PLC fell 0.8%, United Utilities Group PLC was off 0.2%, but National Grid PLC ended fractionally higher.

Meanwhile, Wolseley PLC shares fell 2.6%, after the company swung to an interim half-year net loss of 58 million pounds (http://www.marketwatch.com/story/wolseley-falls-to-net-loss-but-lifts-dividend-2015-03-24) ($86.8 million). But the heating and plumbing products supplier also raised its dividend by 10% to 30.25 pence a share.

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