London stock market indexes experienced a rebound on Wednesday, driven by significant gains in major banks, as lower-than-anticipated domestic inflation bolstered expectations for a potential interest rate cut by the Bank of England. The UK’s blue-chip FTSE 100 rose 1.7% by 1032, putting it on pace for its best day since April 14, after energy and defense stocks weighed on the benchmark index in the previous session. The midcap FTSE 250 index added 1% to reach a near-seven-week high.

British inflation eased more than expected to 3.2% in November from 3.6% in October, marking its lowest level since March and strengthening expectations for a BoE rate cut on Thursday. The unexpected slowdown, driven by lower food prices and Black Friday discounts, weakened sterling and boosted expectations for further rate cuts in 2026. The FTSE 350 banks index led gains, rising 2.9% to its highest level since 2008. HSBC Holdings climbed 3.8% following a brokerage upgrade, while Standard Chartered rose 2.2% and Barclays advanced 2.3%.

Energy stocks rebounded 2.5% after sharp losses in the previous session, supported by higher oil prices following U.S. President Donald Trump’s order to impose a total blockade on all sanctioned oil tankers entering and exiting Venezuela. Industrial metal miners gained 2.4%. The session’s gains positioned the FTSE 100 for its strongest annual performance since 2009, with year-to-date gains of 20.5%, outpacing the S&P 500’s 15.6% rise this year.

Among individual stocks, outsourcing firm Serco surged 5.6% to a decade high after forecasting profits above expectations for this year and next. Business supplies distributor Bunzl fell 2.8%, making it the top loser on the FTSE 100, after the company projected a slight year-on-year decline in its 2026 operating margin.