The FTSE 100, which had been holding at a near one-month high this week, rose 0.1%, while the FTSE 250 dipped 0.4% as the pound weakened slightly ahead of a Bank of England's interest rate decision on Thursday.

The drop in the currency, however, boosted exporters British American Tobacco, Unilever and Diageo, which were the best performers on the main bourse.

A standout loser in the wider London market was smallcap Intu Properties, which slumped 17.1% after saying it may need to raise additional cash.

That came along with a warning that letting activity slowed in the third quarter as some customers delayed decisions due to Brexit uncertainty. The company also forecast a drop in annual rental income.

The comments knocked 1%-2.5% off shares in bigger rivals Land Securities, British Land and Hammerson.

Global markets were held back by downbeat U.S. productivity data and a lack of major updates on U.S.-China trade talks after recent optimism that the world's two largest economies could sort out their dispute as soon as this month.

The FTSE 100, whose constituents book more than two-thirds of their earnings abroad, had in August suffered its steepest monthly fall this year when trade tensions peaked.

"A vast amount of optimism built into financial markets over the past two weeks," OANDA analyst Jeffrey Halley said. "There are plenty of banana skins that could slip up the story."

Mothercare shares leapt 33% on their best day in nearly two decades. The baby products retailer shut all its UK stores and laid out plans to return the rest of the company to profitability by fiscal 2021.

"There were worries that they (Mothercare) are going to go bust, they are obviously not bust," a trader said.

Wednesday's rally helped Mothercare claw back all the losses that followed its notice of intent to appoint administrators for its UK operations on Monday.

In the same sector, Marks & Spencer ended marginally lower after jumping nearly 8% earlier in the session. It reported a plunge in first-half earnings, but like-for-like sales growth in its food business.

Graphic: Brexit woes hammer real estate cos and mall operators - https://fingfx.thomsonreuters.com/gfx/mkt/12/8287/8218/Pasted%20Image.jpg

(Reporting by Muvija M, Shashwat Awasthi and Indranil Sarkar in Bengaluru; Editing by Saumyadeb Chakrabarty and Mark Potter)

By Muvija M and Shashwat Awasthi