The FTSE 100 index rose 0.67% to close at 9,177.99 points, while the FTSE 250 advanced 0.71% to 21,313.07 points.
Sterling also strengthened, rising 0.4% on the dollar to trade at $1.3447, as it gained 0.17% against the euro, changing hands at €1.1525.
“It’s another uneven day for financial markets as the worry list gets even longer,” said Russ Mould, investment director at AJ Bell, pointing to concerns over fiscal policy and geopolitical tensions as drivers of volatility.
UK activity showing signs of improvement as Reeves delays budget
In economic news, UK activity showed signs of improvement as fresh data indicated a rebound in the services sector, while markets braced for the government’s delayed budget and rising global uncertainty sent investors into safe-haven assets.
Final estimates from S&P Global showed the UK services purchasing managers’ index (PMI) climbed to 54.2 in August, marking a 16-month high and exceeding both the initial flash reading of 53.6 and market forecasts of 51.8.
The index was up from 51.8 in July, driven by a sharp rebound in new orders and improved demand both at home and abroad.
However, hiring remained weak, with workforce numbers declining for a tenth consecutive month as rising payroll costs constrained recruitment.
Tim Moore, economics director at S&P Global Market Intelligence, said the figures left the services economy “on a much stronger footing” but warned that “many service providers still commented on elevated government policy uncertainty and worries about forthcoming tax-raising measures expected in the autumn Budget.”
Patrick Munnelly, market strategy partner at TickMill, noted that “UK shares bounced back on Wednesday, driven by strong performances in healthcare and mining stocks, following their steepest decline in nearly five months during the prior session due to fiscal worries.
“However, early gains faded by the close as investor caution over the fiscal outlook resurfaced.”
The UK Treasury meanwhile confirmed chancellor Rachel Reeves would deliver the government’s budget on 26 November, nearly a month later than usual, amid mounting pressure to tackle high spending and debt levels while addressing sluggish growth and inflation still running at 3.8%.
Reeves said in a video message that she planned to “bring inflation and borrowing costs down … by keeping a tight grip on day-to-day spending and by enforcing my non-negotiable fiscal rules.”
Bond market volatility intensified, with Mould noting: “The 30-year gilt yield continued its ascent, briefly touching 5.756% before pulling back a touch.
“Bond investors are worried about the state of public finances and uncertainty over how the government will fill the black hole.
“Chancellor Rachel Reeves is under pressure to produce new solutions at the forthcoming Budget, and we could see further volatility on the bond market ahead of this event.”
Gold and global data
Gold prices continued their record-breaking run, climbing to $3,559 an ounce after breaching $3,500 on Tuesday, up 41% over the past year.
The World Gold Council also revealed plans to launch a digital version of the metal, with CEO David Tait telling the Financial Times that digitisation would allow traders to “pass gold digitally around the gold ecosystem, as collateral, for the first time.”
Eurozone data painted a mixed picture, as producer prices rose 0.4% month-on-month in July, twice the pace expected, driven by higher energy costs, though annual inflation eased to 0.2%.
Meanwhile, the bloc’s composite PMI edged up to 51.0 in August, a 12-month high but below expectations, with manufacturing gaining momentum while services growth weakened.
Hamburg Commercial Bank economist Cyrus de la Rubia warned the region risked stagnation, noting that “the economy has been growing since the start of the year, but the pace is painfully slow.”
In the US, job openings fell to 7.18 million in July, their lowest level since September 2024, undershooting expectations and signalling cooling labour demand.
China’s services sector also accelerated, with the RatingDog PMI rising to 53.0 in August, its highest since May 2024, supported by stronger domestic and export demand.
Precious metal miners rise with gold prices, Hilton Food Group slumps
On London’s equity markets, Fresnillo jumped 8.08%, while Hochschild Mining gained 7.62% and Endeavour Mining rose 3.6%, as investors piled into gold-linked stocks amid safe-haven demand.
Watches of Switzerland surged 6.09% after confirming it expected no material impact from US tariffs in the first half of the 2026 financial year.
“While the trading update is light on detail,” said Mould, “the lack of any major alarms and the fact the company is sticking with existing guidance is enough for investors to give it a warm welcome.”
Babcock International climbed 3.29% following a Financial Times report that the UK was in advanced talks to build Type-31 frigates for Denmark and Sweden at Rosyth in Scotland.
On the downside, Hilton Food Group slumped 17.4% after posting what analysts described as “mixed” first-half results, with revenue up 7.6% to £2.09bn but pre-tax profits rising just 0.3% to £33.6m.
Mould said: “Hilton Food has reported weaker demand for white fish and has incurred regulatory-linked shipping issues for smoked salmon.
“That’s prompted certain analysts to downgrade earnings forecasts and caused the share price to slip up.”
Pearson dropped 3.55% after Goldman Sachs warned it expected only “slight” growth acceleration in the third quarter, cutting forecasts ahead of results in late October.
Ashtead Group fell 0.63% despite reiterating its full-year outlook.
However, Munnelly highlighted that “the company is making headway on its NYSE re-listing, which is planned for March 2026, and has increased its projections for free cash flow to between $2.2bn and $2.5bn, up from $2bn to $2.3bn.”
M&G edged down 0.43% even after it reported steady first-half profits and strong net inflows, with Munnelly noting the stock “fell short of market expectations for its half-year adjusted operating profit, reporting £375m, below analysts’ consensus of £398m.”
Reporting by Josh White for Sharecast.com.