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FTSE 100 falls on earnings drag; still logs best Feb in four years

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain

By Ankika Biswas and Shashwat Chauhan

(Reuters) -The UK's FTSE 100 index fell on Tuesday, dented by online grocery retailer Ocado and consumer care firm Croda International on weak earnings, but the benchmark index managed to record its best February performance in four years.

The exporter-heavy FTSE 100 closed 0.7% lower, but notched its strongest February gain of 1.3% since 2019, buoyed by higher earnings and a weak pound earlier this month.

British long-dated government bond yields touched four-month highs, tracking euro zone government bond yields after France and Spain's inflation data aggravated interest rate hikes worries.

This, coupled with the European Union trade agreement, helped the pound extend gains for the second straight day, also pressuring equities.

Meanwhile, data showed British grocery inflation hit another record high of 17.1%, further cementing the case for higher rates.

"Prospect of rates turning higher or at least being kept elevated for longer is being reflected in the strength of the pound," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Further, a media report said that Bank of England official Catherine Mann warned that a slump in energy prices might prompt consumers to spend more on other things, potentially aiding inflation.

On the earnings front, Ocado slid 12.2% and hit a three-month low on a wider-than-expected full-year loss.

Croda International dropped 5.2% to log its steepest one-day percentage drop in nine months as its beauty, fragrance and home care division's annual profit missed expectations.

St James's Place rose 3.6%, its strongest one-day gain in a month, after the wealth manager posted higher annual profit, underpinned by strong new business flows.

British outsourcing firm Serco Group gained 4.7% on higher full-year profit, share buyback plan and increased annual dividend, while aquaculture biotech firm Benchmark Holdings Plc jumped 5.7% following a quarterly profit surge.

Britain's biggest supplier of building materials Travis Perkins dropped 4% following lower annual profit.

(Reporting by Shashwat Chauhan and Ankika Biswas in Bengaluru; Editing by Sherry Jacob-Phillips, Shailesh Kuber, William Maclean)