Enthusiasm for blue-chip stocks was evident in London yesterday despite concerns over UK inflation and a disappointing start to trading on Wall Street.

The FTSE 100 Index recovered from a lunchtime dip to close 14.3 points higher at 4898.5 on the back of positive news in the pubs sector and a major deal by directories group Yell.

Investors were upbeat even though the Consumer Prices Index was unchanged at 1.9 per cent last month, adding to the case for a further interest rate rise. The data - which came in slightly below the consensus forecast of two per cent - led some analysts to suggest it offered fresh evidence that an economic downturn may be underway.

Trading on Wall Street began on the back foot with the Dow Jones Industrial Average falling nearly 20 points, reversing some of the advances of yesterday.

Patchy economic data overshadowed a fresh fall in the cost of a barrel of US light crude to $48.31, 30 cents lower than it started the session.

In London, Yellow Pages owner Yell was the second highest top flight climber after unveiling a deal worth £829m for a leading directories publisher in California and Texas. The stock rose more than four per cent or 17.25p to 415p as it also reported a 12 per cent rise in annual underlying earnings to £402.8m.

Pubs group Enterprise Inns cheered 18.5p to 741p after it shrugged off the tough conditions suffered by many of its rivals to reveal better-than-expected first half profits.

Airports operator BAA was also in the black, advancing more than one per cent or 9p to 612p as it posted a forecast-beating 18.8 per cent hike in annual profits after a record number of passengers used its airports.

But news that Marks & Spencer has appointed a chairman to replace Paul Myners failed to please investors. Shares weakened a penny to 325p after M&S said Lord Burns, a former permanent secretary to the Treasury, will become deputy chairman in October and will take the lead role in July next year.

Outside the top flight, shares in office pot plants and washroom services group PHS soared 12 per cent, 10.25p higher at 98p, after the company confirmed rumours that it was the subject of takeover interest.

Telecoms equipment group Marconi added 4.5p to 274p despite warning it faced a £50m hit to revenues this year following its failure to land a BT contract.

Baker Greggs gained 40p to 4550p after it reported higher sales, but warned it may struggle to maintain its recent growth rate. Shipbuilder and support services group VT fell 1.5p to 315p after it forecast a slowing UK defence support services market, but said its prospects remained good.

Biggest risers were Schroders up 38.5p at 727p, Yell Group 17.25p ahead at 415p, Schroders NV up 22p to 669p and British Airways rising 7.75p at 268.25p.

Biggest fallers included William Hill, Antofagasta,Tate & Lyle and Old Mutual.