By Alistair Smout
LONDON (Reuters) - The FTSE 100 touched a 15-year high on Wednesday before ending the day flat, as the market alternated between concern that a ceasefire in Ukraine was crumbling and optimism that a deal over Greek debt was in reach.
Strong British labour-market data also reinforced expectations of an interest-rate hike soon, pushing gilt yields up to their highest since the end of last year and further emphasising the contrast between the UK and the euro zone - where the European Central Bank has pledged to buy bonds to compress rates further.
The FTSE 100 index (FTSE) rose to 6,921.32, its highest since January 2000 and only 0.4 percent off the record high of 6,950.60 set in December 1999, before easing back to a closing level of 6,898.08.
"Markets reacted most to the idea that the inflation drop is temporary and that inflation will pick up sharply at the end of 2015 spurring a rate-hike sooner than (mid-2016)," said Jasper Lawler, analyst at CMC Markets.
Technical analysts said that while the new peak could spur the market on towards a record high, a failure to close above 6,900 could see the market drop away again.
"This could turn out to be a false breakout for, after all, it is not the first time the FTSE has peaked above 6,900 only to then stage a sell-off," said Fawad Razaqzada, technical analyst at Gain Capital. "A decisive close above 6,900 would be a particularly bullish outcome, while below this key level would be bearish."
By 1430 GMT it was down 18.11 points, or 0.3 percent at 6,880.02. Some traders cited mounting concern over in Ukraine as a reason.
"We see market risk led by Ukraine and geopolitics as among the key drivers for a move lower (in the FTSE)," Atif Latif, director of trading at Guardian Stockbrokers, said.
Coca-Cola Hellenic (L:CCH) dropped 3.1 percent after the company reported a 11.4 percent drop in profits and on concern about developments in Ukraine. It has substantial exposure to Russia, which has seen sanctions imposed by the West over the conflict in Ukraine.
The FTSE 100 underperformed the euro zone's Euro STOXX 50 (STOXX50E), up 0.8 percent after Greece said it intends to ask on Wednesday for an extension of its loan agreement with the euro zone.
Hopes that a deal might be struck to keep a financial lifeline for Greece, despite misgivings from international lenders, also helped to support UK-listed financials.
Among other gainers, Intercontinental Hotels (L:IHG) rose 1.8 percent, rebounding from a fall after its annual results on Tuesday.
Analysts said the share price was stretched after the hotel group reported results in line with forecasts, but the shares were buoyed on Wednesday by upgrades to its target price from UBS and Jefferies.