Miners lift FTSE but inflationary fears cap gains

By Rebekah Curtis

LONDON, May 14 (Reuters) - British blue-chip shares eked out modest gains early on Wednesday, as miners thrust higher by merger and acquisition talk partly offset a banking sector bruised by an increasingly tough inflationary climate.

By 0806 GMT the FTSE 100 .FTSE was up 8.9 points, or 0.1 percent at 6,220.7 points, as shares rose across Europe. Advancing shares and decliners were at a ratio of one to one.

Miners dominated the gainers list, together adding 18 points to the index. Leading the FTSE's advance, BHP Billiton (BLT.L: Quote, Profile, Research) jumped 3.4 percent after dealers cited talk that a Chinese entity, possibly aluminium group Chinalco, was looking to buy a stake. [nSYD53306]

Separately, BHP Chief Executive Marius Kloppers told broadcaster CNBC the company was not ruling out adding cash to its all-share hostile offer for rival Rio Tinto (RIO.L: Quote, Profile, Research). [ID:nSYD11531]

Rio and Anglo American (AAL.L: Quote, Profile, Research) both tacked on 1.9 percent, while Vedanta Resources (VED.L: Quote, Profile, Research) added 2.8 percent.

Banks kept a leash on gains as concerns for the UK economic outlook were stoked by inflation showing no signs of abating at both the consumer and producer level.

Data the previous day showed Britain's consumer price inflation rate leapt by its biggest amount in nearly six years, to a full point above the central bank's 2 percent target, as food and fuel bills soared, while retail sales values fell for a second month in April.

"It looks concerning," said Roger Cursley, a strategist at Investec. "The picture is not pretty at the moment."