Banks lift FTSE 100

Trader in London Image copyright Getty Images

Financial stocks led the London market higher, as investors bet on the benefits of higher UK interest rates.

American investment bank Jefferies wrote a report saying that a hike in base rates would boost the earnings for Royal Bank of Scotland (RBOS) and Lloyds.

RBOS shares rose 3.4% and Lloyds increased by 3.24%

However, Pearson shares were the best performer on the FTSE 100 index, shooting up 3.94%.

It followed a bullish research note from Exane BNP Paribas commending the group on its restructuring.

At the close The FTSE 100 index was up 0.38% at 7313.51.

Oil traded near $52 a barrel after figures on US crude stockpiles showed an unexpected fall, the first decrease since Hurricane Harvey closed the refineries on the Texas coast last month.

On the currency markets, the pound was 0.44% down against the dollar, but flat against the euro.

Among the stock market losers WPP attracted most attention after Morgan Stanley downgraded the stock to "equal-weight" saying an early revival of confidence in the group's business model appeared unlikely.

The stock has lost about a quarter of its value since March due to the deterioration of its advertising outlook. It fell 1.2% during the session.

Among the small caps, shares in crisis-hit construction group Carillion jumped 20.1% on speculation of a pending takeover bid. Reports linked an unnamed Middle East company as a possible bidder.

On the FTSE 250, which rose 0.34% at 19,569.45 points, The hAA was the best performer up 5.8%, after fund manager Neil Woodford said he had increased his stake in the group. Its shares slumped over 12% on Tuesday following the news chief executive Bob MacKenzie had been sacked

On the Aim market, investors liked the taste of Hotel Chocolat's profits, sending the share price as high as 7% before it eased back to stand 2.9% higher.