Rumours swirling that a UK-EU trade deal could be signed as soon as Wednesday evening were enough for markets and the pound to shoot up, reversing falls earlier in the week.
Investors preferred to not let new Covid-19 restrictions dampen spirits as the FTSE 100 index closed up 42.59 points, or 0.7%, at 6,495.75.
The domestic-focused FTSE 250 ended up 347.04 points, or 1.7%, at 20,297.76.
And the pound was up 1% against the dollar at 1.349 and up 0.7% against the euro at 1.106 as markets, closed compared with the same time on Tuesday.
In Paris, the CAC 40 ended up 1.1%, while the DAX 30 in Frankfurt ended 1.3% higher.
David Madden, market analyst at CMC Markets UK, explained: “Increased chatter than the UK and the EU will reach a trade deal has boosted sentiment.
“Equity markets were already up on the session in advance of the optimism surrounding the trade talks, so then the bullish move was turned up a notch.
“The Covid-19 crisis is still very much in the news but for now traders are fixated on the UK-EU situation.
“On the London market, banks, housebuilders, airlines and transport stocks are showing decent gains.”
In company news, pubs operator Marston’s said it will take over the running of around 150 pubs in Wales from SA Brain, safeguarding up to 1,300 jobs in the process. Brains’ chairman had said the decision came because restrictions in Wales have put huge strain on the business.
Shares in Marston’s closed up 5.9p at 74.8p.
Premier Inn, Beefeater and Brewers Fayre owner Whitbread confirmed it has written to landlords saying it intends to only pay 50% of rent for the final three months of the year due to “significant” net cash outflows in the first half of the year. Shares closed up 121p at 3,138p.
Shareholders in London-listed oil and gas firm Cairn Energy celebrated the announcement the company won nearly £1 billion in an arbitration case against the government of India via a tribunal in the Netherlands. Shares soared 26.7p, or 22.1%, at 202.6p.
The board of easyJet were narrowly re-elected to serve for another year, months after a major bust-up with the company’s founder Sir Stelios Haji-Ioannou, who is unhappy at plans to buy 107 planes from Airbus.
Chairman John Barton, and chief executive Johan Lundgren, only won a little over 57% of the vote. Shares closed up 57p at 832p.
And British Land announced it has signed a deal to sell stakes in three sites in London’s West End to Allianz Real Estate for £401 million. Shares closed up 14.1p at 497.7p. The deal is expected to close in January.
The biggest risers on the FTSE 100 were Lloyds Banking Group up 2.43p at 37.125p; IAG up 9.55p at 161.8p; Natwest Group up 8p at 166.9p; Berkeley Group up 207p at 4,628p and JD Sports up 36.6p at 850.2p.
The biggest fallers were Just Eat Takeaway down 194p at 8,000p; Reckitt Benckiser down 104p at 6,452p; CRH down 46p at 3,111p; AstraZeneca down 104p at 7,224p and Experian down 35p at 2,779p.