LONDON'S premier index drifted lower on Tuesday after mixed trading updates from US lenders dealt a blow to British banking stocks.

The FTSE 100 Index slipped 13.91 points to 7,390.22, with Barclays taking a hefty hit after Wall Street titan Goldman Sachs reported flat earnings for the second quarter.

Goldman earned $1.63 billion (£1.25bn), in line with the same period a year earlier, as it was held back by a 17 per cent drop in revenues from divisions containing its trading desks.

However, Bank of America cheered a 10 per cent jump in second quarter profits as gains from higher interest rates helped to offset a drop in trading revenue.

Shares in Barclays were down just shy of two per cent, or 4p to 205.1p, while Royal Bank of Scotland edged 2.5p lower to 250.9p.

European markets were also in the red, with Germany's Dax sinking 1.3 per cent and the Cac 40 in France dropping 1.1 per cent.

On the currency markets, the pound endured a choppy session as it responded to the latest slew of UK inflation data from the Office for National Statistics (ONS).

Sterling had pushed to 1.31 US dollars in the run up to the announcement, but tracked back when the Consumer Price Index (CPI) measure of inflation unexpectedly slowed to 2.6 per cent in June.

Economists had been expecting the cost of living to remain at a near four-year high of 2.9 per cent.

The fall was largely driven by a slide in fuel and computer game prices, while some upward pressure came from the cost of food, which recorded smaller falls for June compared to the same month a year ago.

The UK currency was 0.2 per cent lower against the US dollar at 1.302 by the time the London market closed, as traders expect the Bank of England to hold off from an interest rate rise if inflation keeps rolling back.

Sterling was also 1.1 per cent lower versus the euro at 1.125.

The price of oil climbed amid signs that demand is sucking up some oversupply in the market.

Brent crude rose 0.7 per cent to $48.78 a barrel, but failed to break through the 50 US dollar mark as traders remain cautious about Opec's efforts to support prices by curbing supply.

In UK stocks, Royal Mail Group was among the biggest risers after narrowing the decline in letter deliveries thanks to a boost from general election political mailings.

The group said total letter revenues fell by a better-than-expected four per cent in the three months to June 25 after the snap election that month.

But with the benefit of the political mailings stripped out, letter volumes still fell six per cent in the group's first quarter.

Its UK parcels arm continued to help offset the ongoing decline in letters, with volumes up five per cent and revenues up three per cent.

This left overall underlying turnover from the letter and parcels arm one per cent lower.

Shares in the firm rose more than three per cent, or 12.3p to 411.1p.

The biggest risers on the FTSE 100 Index were G4S up 11.3p to 341.1p, British Land Company up 19p to 623p, Royal Mail up 12.3p to 411.1p, Associated British Foods up 64p to 2,913p.

The biggest fallers were Experian down 32p to 1,532p, Barclays down 4p to 205.1p, Wolseley down 65p to 4,600p, British American Tobacco down 68p to 5,237p.