By Shashwat Chauhan and Johann M Cherian
(Reuters) -Britain's main stock indexes closed higher on Wednesday with the FTSE 250 hovering near one month highs, while investors awaited minutes from the U.S. Federal Reserve's policy meeting to gauge the path forward for interest rates.
The exporter-heavy FTSE 100 rose 0.4% by 1645 GMT, lagging its European counterparts as the STOXX 600 closed over 1% higher.
The more domestically focused FTSE 250 jumped 1.3% with airlines Wizz Air Holdings and Easyjet soaring between 7% to 10%.
"The sell-offs that we had seen in some of these stocks last year were potentially overdone and the market is now seeing it as relatively cheap on an earnings ratio," said Stuart Cole, head macro economist, Equiti Capital.
The midcap index last year performed its worst since the 2008 financial crisis, reflecting a struggling economy bogged down by soaring inflation and rising interest rates.
As the fight against inflation continues, investors will focus on minutes from the Fed's meeting in December, when the central bank shifted to a smaller 50-basis point rate hike, but cautioned rates may need to remain higher for longer.
"It is going to be key in the meeting minutes today to see how the decision of the 50 basis points came," said Daniela Hathorn, senior market analyst at Capital.com.
"Is it because they think the economy is starting to show signs of cooling or is it because they think 'let's just take a step back to see how these rate hikes have impacted the economy'."
Gains on the largecap FTSE were capped by a 3% slide each in BP and Shell as crude prices fell on concerns about weak demand due to the state of the global economy and China's rising COVID-19 cases.
Supermarket chains Tesco and Sainsbury's rose between 2% and 4% after data showed British grocery sales rose 9.4% in the four weeks to Dec. 25, driven by price inflation rather than increased purchasing.
(Reporting by Shashwat Chauhan and Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips, Shounak Dasgupta and Alison Williams)