A session that began with British stocks in good heart ended with the market falling disappointingly by the close, after several changes of mood.

Once again, London was responding mostly to events in the US where the latest inflation news calmed jangling nerves and provided much needed reassurance about the short-term course of interest rates.

A 0.2 per cent increase in consumer prices in July was interpreted by some as an indicator that rates will be left on hold after next Tuesday's meeting of the US Federal Reserve's Open Market Committee.

Other economic news from the US, including weekly jobless claims, industrial production and capacity utilisation seemed to do no harm to market sentiment.

The late slide in British stocks took place against a positive performance from Wall Street, where the Dow Jones Industrial Average rose more than 30 points in early trading, before drifting back shortly after London closed.

By the close, Footsie was 12.3 points off at 4,991.2. There was some comfort from the mid-cap and small cap stocks, with both sectors stubbornly refusing to mirror the choppy performance of the leaders.

The FTSE Mid-250 ended 12.9 up at 4,689.9.