The domestically focused FTSE 250 index jumped 1.2%, rising for a third straight session, helped by a 10.5% surge in shares of Dixons Carphone's after the electricals retailer posted a big rise in first-half profit.
The European Union's chief executive said headway had been made in the long-running trade talks with Britain and that the next few days would be critical ahead of an end-of-year deadline.
Latest business surveys showed Britain's economy limped back to growth in December following November's four-week lockdown in England, although hospitality businesses still struggled with restrictions.
"Today's UK PMI release provides a ray of hope in what may otherwise be a tough winter," said Jai Malhi, global market strategist at J.P. Morgan Asset Management.
"Investors will be buoyed by the resilience in these surveys and with a vaccine now being slowly rolled out, any weakness in the near-term data may cause less of a stir for markets than it would have without the vaccine."
A slew of stimulus measures coupled with vaccine optimism has helped London's stock indexes recover from multi-year lows hit in March. But recent gains have been capped by fears surrounding the near-term economic damage from the most onerous restrictions in Britain's peacetime history.
The blue-chip FTSE 100 index firmed about 0.9%, with Wall Street also edging up on signs that another fiscal stimulus package was imminent, while investors also awaited the U.S. Federal Reserve's policy decision later in the day. [MKTS/GLOB]
Among individual movers, Fashion retailer Superdry jumped 9.6% as it said interim Chief Executive Officer Julian Dunkerton would take the top job on a permanent basis.
(Reporting by Medha Singh and Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, Saumyadeb Chakrabarty and Mark Heinrich)
By Medha Singh
