Market Update: Shares shrug off gloomy inflation data

Gloomy news on inflation and industrial production fails to dent the more confident mood generated by a useful rally in BP shares, a robust overnight performance in New York and takeover speculation in the insurance underwriting sectors.

UK inflation expectations jumped to 3.3% in May, the highest level for nearly two years, according to the Bank of England's quarterly survey,

Meanwhile UK May production input costs eased less than expected and April industrial production also fell unexpectedly.

By 10am the FTSE 100 index was up 35 points at 5,167 and the Mid-250 index was 67 points higher at 9,677.

BP, up 29p to 395p, continued to benefit from political and business support in the wake of the recent American 'Brit-bashing' on the oil spill disaster. Dealers were also hoping that the dividend will be deferred rather than cut.

The recovery in BP and a firm crude price lent support to other energy stocks where Tullow Oil advanced 21p to £11.42 and Cairn Energy 8p to 416p.

Elsewhere insurance underwriters attracted speculative support following the rejected £785 million Apollo bid by BRIT Insurance, 152p to the good at 880p.

Catlin at 346p rose 20p to 346.5p in sympathy.

Home Retail, at 232p, recouped 3.5p of yesterday's fall that followed disappointing Argos sales news and BT Group shrugged off the threat of strike action, improving 2.4p to 134.2p.

GDF Suez takeover speculation continued to enliven International Power, 7p firmer at 307p and a positive review of the drugs sector by Barclays Capital drew attention to GlaxoSmithKline at £11.80, up 17p and AstraZeneca, 31p higher at £30.20.

Other prominent gainers among the leaders included Reed Elsevier at 492.5p, Burberry 798p, Intercontinental Hotels £11.54 and British Airways 197p, between 2.3p and 14p higher.

Profit-taking trimmed 20p from Aggreko at £14.53 and acquisition talk unsettled Imperial Tobacco at £18.80, down 17p.