UK stocks rebound on banking gains ahead of BoE rate cut call

Dec 17 (Reuters) - ‌The UK's stock market indexes rebounded on Wednesday, led by gains ‍in heavyweight ‌banks, as lower-than-expected domestic inflation reinforced expectations that the Bank of England will ⁠cut interest rates.

The UK's blue-chip FTSE ‌100 rose 1.7% by 1032 GMT — on pace for its best day since April 14. Sharp declines in energy and defence stocks had pushed the benchmark index lower on ⁠Tuesday.

The midcap FTSE 250 index added 1% to hit a near-seven-week high.

British inflation fell sharper than expected ​to 3.2% in November from 3.6% in October, its ‌lowest level since March, amplifying hopes ⁠of a rate cut by the BoE on Thursday. 

The surprise decline, driven by lower food prices and Black Friday discounts, sent the sterling lower and ​increased odds of more rate cuts in 2026.

The FTSE 350 index tracking banks led gains, up 2.9%, the highest level since 2008. HSBC Holdings was up 3.8%, with traders pointing to a brokerage upgrade. Standard Chartered and Barclays ​added 2.2% ‍and 2.3% respectively. 

Energy stocks ​jumped 2.5% after a sharp decline in the previous session, buoyed by soaring oil prices after U.S. President Donald Trump ordered a complete blockade of all sanctioned oil tankers entering and leaving Venezuela.

Industrial metal miners surged 2.4%.

The day's moves kept the FTSE 100 on track for its best year since 2009, climbing 20.5% ⁠year-to-date and outpacing Wall Street's benchmark S&P 500 index, which has risen 15.6% this year.

Among individual stocks, outsourcing firm ​Serco's shares jumped 5.6% to surpass a decade high after the company forecasted profit above analyst expectations for this year and the next.

Business supplies distributor Bunzl lost 2.8%, becoming the top loser on the FTSE ‌100 index, after the company forecast a slight year-on-year drop in its 2026 operating margin.

(Reporting by Tharuniyaa Lakshmi and Nikhil Sharma in Bengaluru; Editing by Sahal Muhammed)