The FTSE 100 <.FTSE> ended the session 0.2 percent lower at 7,400.69 points after stronger-than-expected inflation figures for August sent the pound to a one-year high against the dollar, weighing on mostly foreign-earning blue-chips.

Housebuilders <.TRXFLDGBPHBLD> were among the worst-performing stocks, after mid-cap residential housing developer Redrow (>> Redrow plc) dropped 8.3 percent after chairman and founder Steve Morgan's foundation sold 25.9 million shares.

Redrow's fall sent blue-chips Taylor Wimpey (>> Taylor Wimpey), Barratt Development (>> Barratt Developments), and Persimmon (>> Persimmon) down 1.4 to 2 percent as concerns over the British housebuilding sector, one of the worst hit after the Brexit vote, simmered.

Traders cited last week's Berkeley Group (>> Berkeley) share sale as another sign of pressure, and pointed to a BAML research note highlighting risks in a sector "priced for perfection".

Jefferies analysts argued, however, that the sector, which has rallied strongly since the Brexit vote, had not yet peaked.

Among leading FTSE gainers was Ashtead (>> Ashtead Group), jumping 4.5 percent after its first-quarter update showed a profit beat and higher rental revenue in the United States. The firm said hurricanes Harvey and Irma would boost demand for its products.

"Insurers and reinsurers are clearly the most exposed (though we note the change in Irma's path has given some respite to the share prices of these stocks in the last 24 hours) whilst those exposed to reconstruction and replacing insured capital stock are likely to see a pick-up in demand over the next few months," said Edward Park, investment director at Brooks Macdonald.

Costa Coffee owner Whitbread (>> Whitbread) saw its shares weaken 0.4 percent after a double downgrade to "sell" from Citi analysts, who forecast slower earnings and just 4 to 5 years of growth left in the branded UK coffee market.

Mid-cap auto recovery and insurance firm AA (>> AA) rose 3.4 percent after confirming it held talks with rival Hastings (>> Hastings Group Hldg PLC) on a merger, and analysts mulled the implications of such a deal.

"Although there are likely to have been some cost savings benefits from this deal, possibly in the 10 to 15 million pound range from rationalizing platforms, we think its logic would have been primarily around Intellectual Property," said KBW analysts.

JD Sports (>> JD Sports Fashion PLC) shares surged 9 percent to top mid-cap gainers and posted their best day in nearly four years after the sports fashion retailer reported a record first-half profit.

"Trouble at Foot Locker led some analysts to start writing the obituary of "athleisure", but a big earnings beat from JD Sports Fashion today suggests the trend is very much alive and kicking," said Neil Wilson of ETX Capital.

(For a graphic on UK housebuilders click http://reut.rs/2jj0F2k)

(Reporting by Helen Reid and Kit Rees; Editing by Raissa Kasolowsky)

By Helen Reid