UPDATE 2-UK shares drop as inflation jumps; British American Tobacco weighs

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* Consumer price index +0.7% y/y in Jan
* British American Tobacco biggest drag on FTSE 100
* Rio Tinto drops despite upbeat earnings
* FTSE 100 down 0.6%, FTSE 250 drops 1.3%

(Updates to close)
By Shivani Kumaresan and Shashank Nayar
Feb 17 (Reuters) - British shares ended lower on Wednesday
as a third national lockdown affected demand for new goods
leading inflation to pick up a little more than expected in
January, while British American Tobacco slumped despite positive
earnings.
The commodity-heavy FTSE 100 .FTSE ended 0.6% lower, with
construction .FTNMX2350 and financial stocks .FTNMX8770
leading declines. British American Tobacco BATS.L was the
biggest drag. UK inflation rose a little more than expected last month as
the country went back into a coronavirus lockdown, pushed up by
higher food prices and less discounting of household goods such
as sofas, official data showed. "This upward (inflationary) trend is set to continue, given
that by April, we'll no longer be comparing current petrol
prices to pre-pandemic levels and a 9% rise in the household
energy price cap will lift headline CPI to the 1.5% area in the
second quarter," said James Smith, an economist at ING.
The FTSE 100 has recovered nearly 35% from its March 2020
lows and is now 12% below its peak last year, led by stimulus
support, but a surge in infections and lockdowns have recently
slowed the pace of gains.
Prime Minister Boris Johnson is plotting a staged exit from
lockdown that would see the United Kingdom's battered economy
returning to work over the next five months after leaping ahead
of most of the world on vaccinating its people. The mid-cap FTSE 250 index .FTMC ended -1.3% lower.
In company news, British investment platform Hargreaves
Lansdown HRGV.L dropped 6.9% to the bottom of the blue-chip
index after Peter Hargreaves, the largest shareholder and
co-founder, sold $416 million worth of shares. Miner Rio Tinto RIO.L fell 0.4% after reporting its best
annual earnings since 2011 and declaring a record dividend
payout. Signature Aviation SIGSI.L slid 0.2% after agreeing to
sell its engine repairs business to U.S.-based StandardAero for
$230 million.