The London market ended firmly in the black yesterday after overcoming fresh concerns about interest rates.

The FTSE 100 closed the session up 17.1 at 5058.9, despite higher than expected inflation figures that stoked fears of another rise in the cost of borrowing,

Figures showing inflation stayed at 1.6 per cent last month left traders undecided about whether the Bank of England would raise rates by another 0.25 per cent.

Analysts, some of whom had predicted a fall of 0.1 per cent, said the data made a rate rise more likely.

However, investors appeared to shrug off the worries as the FTSE 100 reached its highest level in two-and-a-half years.

A fall in US retail sales to the lowest level in five months also failed to dent progress on Wall Street, where the Dow Jones Industrial Average rose 45 points after London's close.

In London, BG advanced 7p to 395p after it announced a 36 per cent improvement in underlying earnings for the final three months of last year.

As well as a strong performance in 2004, BG impressed investors by raising its previous projections for growth to the end of the decade and beyond.

Power provider National Grid Transco was another riser, up 10p to 544p, after broker CSFB raised its target price for the stock.

Among other blue-chip companies with results, cruise company Carnival rose 13p to 3169p after lifting its revenues forecasts for this year, although it left guidance on earnings unchanged.

Drinks group Diageo continued its recent rally, up 8p to 751p, ahead of its half-year results due out tomorrow, which are expected to show underlying revenue growth of six per cent after stripping out the impact of currency movements.

But directories group Yell was off 2p at 467p, despite the news that UK revenues had risen in the past quarter.

Outside the top flight, UK Coal continued to come under pressure after announcing it would not be able to fulfil a contract for power station Drax.

The mining group saw its share price fall eight per cent, or 10p, to 131p, after blaming geological problems at its Kellingley colliery for the expected shortfall.

Catering equipment group Enodis saw its share price fall, despite posting higher revenues and profits after benefiting from fast food chains extending their menus to include healthier food. Shares weakened 4p to 111p after the results, which one analyst said were exactly as expected.

Book shop chain Ottakar's was in the doldrums after announcing a management reshuffle as it fought against growing competition and slowing sales. Shares fell five per cent, or 14p, to 281p