By Devik Jain
(Reuters) - London's FTSE 100 rose on Wednesday, buoyed by Melrose Industries after it gave an upbeat trading update, with investors awaiting Britain's one-year spending plan announcement later in the day.
The blue-chip index edged 0.1% higher, with turnaround specialist Melrose Industries Plc (LON:MRON) jumping 3.6% after saying it is currently trading at the top end of the board's expectations for 2020.
A slightly weaker pound also boosted shares of big dollar-earning consumer staple companies such as British American Tobacco (LON:BATS) Plc, Diageo (LON:DGE) Plc and Unilever (LON:ULVR) Plc.
Diageo Plc also rose after Credit Suisse (SIX:CSGN) upgraded the stock's rating to outperform and raised its target price.
Finance minister Rishi Sunak is set to announce extra investment to ease a backlog in the health system, counter a surge in unemployment and build new infrastructure in a Spending Review due to parliament around 1230 GMT.
"This is just a one-year review for 2021-22, but it will be interesting to see what the long-term fiscal picture looks like as well as the extent of tightening pencilled in for the year ahead," Deutsche Bank (DE:DBKGn) Strategist Jim Reid said in a note.
Britain's budget deficit is set to reach around 20% of the GDP and its economy is on course for a record crash this year, but the FTSE 100 index rallied more than 15% this month on hopes of a speedy economic recovery based on positive vaccines data.
The domestically focused mid-cap FTSE 250 index, considered a barometer for Brexit sentiment, fell 0.5% after the European Commission's chief said she cannot guarantee there will be a trade pact with Britain and the coming days will be crucial, adding the bloc was prepared for a no-deal.
Roadside recovery company AA Plc jumped 7.2% after it agreed a sale to private equity groups that values the company at 219 million pounds.
Virgin Money (LON:VM) UK Plc slipped 6.2% after the lender posted a 77% drop in annual underlying pre-tax profit.
($1 = 0.7475 pounds)