UK's FTSE 100 touches record high as cooling inflation fuels rate‑cut bets; BAE shines

Feb 18 (Reuters) - The UK's FTSE 100 touched a fresh peak on Wednesday as domestic inflation cooled last month, strengthening expectations of an interest rate cut as soon as March, while defence stocks drew comfort from BAE Systems' strong results.

The blue-chip index FTSE 100 .FTSE rose to an intraday record high, up 1% at 10,666.68 points as of 1105 GMT, while the FTSE 250 midcap index .FTMC inched up 0.2% to trade at a four-year high.

British inflation slowed to 3.0% in January, its lowest in nearly a year, helped by softer rises in transport, food and non-alcoholic drinks, according to the Office for National Statistics.

Sterling GBP=D3 was little changed against the dollar as traders priced in almost an 80% chance of a March reduction in borrowing costs. A soft labour market report on Tuesday had pressured the currency.

Meanwhile, defence stocks .FTNMX502010 rose 2.5%, with BAE Systems BAES.L jumping 3.4% after reporting a better-than-expected jump in full-year operating profit, as global demand swelled its order backlog to a record 83.6 billion pounds ($113.40 billion).

Glencore GLEN.L, fresh from a failed takeover approach from bigger rival Rio Tinto RIO.L, rose 2.7% after the miner reported slightly lower annual earnings and announced a $2 billion shareholder payout.

Energy stocks .FTNMX601010 rose 1.3%, as oil prices rebounded from Tuesday's drop, as investors assessed progress in U.S.-Iran talks but remained cautious about the prospects of a final deal that could ease supply concerns. O/R

Shares in Raspberry Pi RPI.L surged for a second day, last gaining 26%, fuelled by chatter that its products could benefit from low-cost artificial-intelligence projects.