EasyJet (>> EasyJet) jumped 4.5 percent to lead the FTSE after Air Berlin (>> Air Berlin Plc) filed for insolvency and a source said the orange budget airline was in talks to snatch up some of the failed airline's assets.

British Airways owner IAG (>> International Consolidated Airlines Group) also jumped 2.9 percent.

Consumer price inflation unexpectedly held steady in July, data showed on Tuesday, denting the pound and boosting blue-chips, with investors looking ahead to Wednesday's wage data for a better read on the health of the labour market.

"Even if inflation had got stronger, I don't think that would be enough to make the Bank of England raise rates," said Mike Bell, global market strategist at JP Morgan Asset Management.

"The [wage growth] numbers tomorrow are going to be much more important," he said.

Among gainers, defence and security firm BAE Systems (>> BAE Systems) rose 2.3 percent after Goldman Sachs added the stock to its "conviction list" and reiterated its "buy" rating.

"We expect programme growth, as well as a new Typhoon (combat aircraft) order from Saudi Arabia, to cement the outlook for 2019/2020," it said, adding that BAE had underperformed the FTSE 100 recently and was now trading at a wider-than-usual discount to U.S. peers.

Meanwhile Next (>> Next) fell 3.1 percent after Berenberg downgraded its rating on the retailer to 'sell' from 'hold', citing its large retail outlet footprint as a brake on its ability to invest in online services and home delivery.

"While it was quick to recognise the online opportunity, it has failed to fully adapt its business model, instead focussing on short-term cash flow and profitability," said Berenberg analysts.

They pointed to similarities between Next and Kodak, which had a dramatic fall from grace ending in insolvency when it failed to keep pace with innovations in the photography market.

Miners Randgold Resources (>> Randgold Resources) and Fresnillo (>> Fresnillo) led losers, down 3 to 3.2 percent as weaker Chinese housing sector data weighed on commodities stocks across the market.

Oil firms Petrofac (>> Petrofac) and Tullow Oil (>> Tullow Oil) held mid-caps back, down around 4 percent each after crude prices tumbled overnight.

Miners Centamin and Acacia Mining also weighed on the index.

Although Tuesday's figures suggested inflation was losing steam, it remained above the Bank of England's target level.

"When it comes to stocks, the impact of inflation is not straightforward," said Kathleen Brooks, analyst at City Index.

"Even though the UK has above-target inflation, growth companies are benefiting from low interest rates, which is why the UK's AIM market has had a stonking year."

(Reporting by Helen Reid; Editing by Kevin Liffey)

By Helen Reid