UK's FTSE 100 touches record high as cooling inflation fuels rate-cut bets; BAE shines

(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window)

*

FTSE 100 up 1%, FTSE 250 up 0.2%

*

Inflation drop strengthens ?BoE rate cut expectations

*

Glencore (GLCNF) posts lower earnings, ?announces $2 billion payout

*

BAE Systems lifts defence stocks with strong earnings

Feb 18 (Reuters) - The UK's FTSE ?100 touched a fresh peak on Wednesday as domestic inflation cooled ?last month, strengthening expectations of an interest rate ?cut as soon ?as March, while defence stocks drew comfort from BAE Systems' strong results.

The blue-chip index FTSE 100 ?rose to an intraday record high, ?up 1% at 10,666.68 points as of 1105 GMT, while the FTSE 250 midcap index inched up 0.2% to ?trade at a four-year high.

British inflation ?slowed ?to 3.0% in January, its lowest in nearly a year, helped by softer rises in transport, food and non-alcoholic drinks, according to ?the Office for National Statistics.

Sterling was little changed against the ?dollar as traders priced in almost an 80% chance of a March reduction in borrowing costs. A soft labour market report on Tuesday had pressured the currency.

Meanwhile, defence stocks rose 2.5%, with BAE Systems jumping ?3.4% ?after reporting a better-than-expected jump in full-year operating profit, ?as global demand swelled its order backlog to a record 83.6 billion pounds ($113.40 ?billion).

Glencore (GLCNF), fresh from a failed takeover approach from bigger rival Rio Tinto, rose 2.7% after the miner reported slightly lower annual earnings and announced a $2 billion shareholder payout.

Energy stocks rose 1.3%, as oil prices rebounded from Tuesday's drop, as investors assessed progress in U.S.-Iran talks but remained cautious about the prospects ?of a final deal that could ease supply concerns.

Shares in Raspberry Pi surged for a second day, last gaining 26%, fuelled by chatter ?that its products could benefit from ?low-cost artificial-intelligence projects. (Reporting by Tharuniyaa Lakshmi in ?Bengaluru; Editing by Leroy Leo)