By Helen Reid
LONDON (Reuters) - A rally in Britain's FTSE 100 was stopped in its tracks on Wednesday as an unexpected jump in UK inflation boosted sterling, while home improvement retailer Kingfisher slid 5 percent after reporting weaker profits.
The FTSE 100 <.FTSE> was down 0.2 percent by 0850 GMT, having started the session up 0.3 percent.
Bigger than usual seasonal increases in sea and air fares and higher theatre admission prices helped drive British inflation to a six-month high in August, official data showed.
Sterling jumped above $1.32 to its strongest level in nine weeks on the news, in turn driving the exporter-heavy FTSE 100 into the red. The index tends to move inversely to the currency.
Before the inflation numbers, the FTSE 100 had been extending the previous day's rally as investors hoped a U.S.-China trade dispute was nearing endgame.
Washington on Tuesday slapped further 10 percent tariffs on $200 billion of Chinese imports and Beijing retaliated.
"China are out of bullets, they've taxed all U.S. imports, depreciated the currency, and it doesn't seem anyone else has jumped on the bandwagon to criticise the latest tariffs," said Christopher Peel, chief investment officer at Tavistock Wealth.
"Their economy is export-led, they can't afford for it to go out of control. The U.S. can afford to let it get out of control. Trump has won this hook line and sinker," he added, pointing to the big slide in China's stock markets compared to the United States.
The biggest FTSE 100 faller was Kingfisher
"Kingfisher's end-markets have been mostly very unhelpful at a time when management is attempting to implement major strategic and structural change," wrote Davy Research analysts.
Miners helped support the FTSE 100 as copper prices climbed on investors' hopes the intensity of the trade dispute would ease.
Engineering software firm Aveva
"It sets a reassuring tone," wrote Stifel analysts. "The transition to greater levels of Recurring Revenue is expected to increase long-term free cash flow generation."
(Reporting by Helen Reid; Editing by Andrew Heavens)