(Reuters) - London’s FTSE 100 was dragged lower by BHP Group on Wednesday as investors fretted over the miner’s sale of its petroleum arm, while the midcap index closed at a record high after inflation fell sharply. The blue-chip FTSE 100 dropped 0.2% with BHP Group weighing the most. The stock tumbled 5.9%, after hitting record highs on initial optimism over BHP’s deal with Woodside Petroleum. The domestically focussed mid-cap index rose 0.6% to a record closing high of 23,836.37 points, after British inflation unexpectedly fell to the Bank of England’s 2% target in July, assuaging some fears over the bank tightening policy. Still, economists said the reading was most likely a blip, as the reopening of the economy after lockdown drives prices higher. Inflation is considerably higher than the 0.4% level seen in February. A recent resurgence in COVID-19 cases across the globe has weighed on the FTSE 100, which is exposed to trade disruptions caused by the virus. But the midcap index has benefited from optimism over a local vaccination program. “(The UK’s inflation) could just as easily move higher, probably driven by the delayed economic reopening that was deferred from June,” said Michael Hewson, chief market analyst at CMC Markets. Hewson also noted a lot of retailers are nudging prices higher as they look to claw back revenue lost from lockdowns, while the wage growth is much higher than the headline CPI number - all signs that inflation could go up. Persimmon, Britain’s No. 2 homebuilder, rose 1.5% after it said its current forward sales were up about 9% from pre-pandemic levels. British insurer M&G plc rose 0.6% after it said it would buy financial advice provider Sandringham Financial Partners in a deal that would add assets worth more than 2.5 billion pounds to M&G. (Graphic: UK inflation drops to 2%, ) Reuters Graphic Reporting by Shashank Nayar in Bengaluru; editing by Uttaresh.V, Subhranshu Sahu and Nick Zieminski Our Standards: The Thomson Reuters Trust Principles.