London stocks had dipped into the red by midday on Wednesday after recent highs, as investors remained optimistic of an end to the longest US government shutdown in history.
The FTSE 100 was down 0.1% at 9,887.42, having hit fresh highs earlier in the session, as the index sets its sights on the 10,000 level.

Sterling was 0.2% lower against the dollar and borrowing costs rose amid reports Prime Minister Keir Starmer is facing a leadership challenge.

Away from home, investors were keeping a close eye on the US, where a vote is due in the House of Representatives to pass the funding bill ending the shutdown.

Kathleen Brooks, research director at XTB, said: "As we move through the European trading session on Wednesday, there is residual optimism in the market that continues to boost risk sentiment.

"European indices are having another strong day, although the FTSE 100 is bucking this trend and is posting a small loss. US futures suggest a higher open later today and pre-market trading suggests that the tech sector will open higher this afternoon."

Brooks said the prospect of an end to the US government shutdown later on Wednesday is fuelling demand for risk assets.

"The end of the shutdown is positive for financial markets as we should get a clear read on economic data in the next week or so. Some analysts expect the delayed CPI and labour market data to be released next week, which will give us a read of the underlying strength of the US economy.

"Investors appear to be positioned for this data to be risk-positive, however, proof is needed, which means that the delayed US data releases are high stakes for financial markets."

As far as the FTSE 100's underperformance is concerned, Brooks noted that communication, consumer discretionary and the real estate sector were all acting as a drag on the index.

"There are concerns about economic growth, including a downbeat update from FTSE 250 homebuilder Taylor Wimpey, who said that tax changes in the budget could impact home sales. When home builders slow, it can be a lead indicator for economic weakness, which could thwart FTSE 100 gains in the short term.

"However, the FTSE 100 has been tremendously resilient to weaker growth, budget risk and political noise this year. On a YTD basis, the FTSE 100 is outperforming the S&P 500, the Eurostoxx 50 index and is performing at the same level as the Nasdaq. The UK index is higher by more than 21% on a USD basis and 26% on a currency-adjusted basis. Not bad, considering how the UK is portrayed in the media."

In equity markets, SSE surged to the top of the FTSE 100 as it said it will spend billions on the UK's electricity network as it unveiled a five-year investment plan alongside interim results.

The power generator said the £33bn, five-year plan would increase its exposure to UK electricity networks and drive earnings growth.

The update came as it posed a 29% fall in interim adjusted earnings per share, to 36.1p, which SSE said was in line with expectations and consistent with typical seasonality.

Games Workshop got a boost after Jefferies hiked its price target on the stock to 18,300p from 11,850p, reiterating its 'buy' rating.

Luxury fashion brand Burberry advanced ahead of interim results on Thursday.

Avon Technologies shot higher as it posted full-year revenue and operating profit ahead of market expectations.

Marshalls rose as it backed its full-year expectations and hailed a "resilient" performance in the nine months to 10 October, with group revenue up 2% on the same period a year ago to £548m.

On the downside, Experian slumped despite boosting its full-year outlook following a strong first half.

3i Group fell ahead of first-half results on Thursday, while easyJet flew lower after Jet2 announced that it would start flying from Gatwick airport.

Housebuilder Taylor Wimpey lost ground after saying it still expects full-year results to be in line with guidance despite experiencing "softer market conditions" so far in the second half.

Net private sales per outlet averaged 0.63 a week since 30 June, down from 0.71 the year before, while underlying pricing remains broadly flat, impacted by uncertainty ahead of the upcoming Autumn Budget and continued affordability pressures on consumers, the company said.

The housebuilder said results were impacted by uncertainty ahead of the upcoming Autumn Budget and continued affordability pressures on consumers. Rivals fell, with Berkeley and Persimmon also lower.

Defence contractor BAE nudged lower as it held annual guidance and cautioned that delays to contract funding and payment timings could occur if the US government shutdown persisted.

Market Movers

FTSE 100 (UKX) 9,887.42 -0.12%
FTSE 250 (MCX) 22,176.61 0.12%
techMARK (TASX) 5,619.10 -0.10%

FTSE 100 - Risers

SSE (SSE) 2,212.00p 12.03%
Games Workshop Group (GAW) 16,280.00p 5.71%
Burberry Group (BRBY) 1,257.50p 4.36%
Metlen Energy & Metals (MTLN) 43.05p 2.14%
Rio Tinto (RIO) 5,397.00p 1.37%
International Consolidated Airlines Group SA (CDI) (IAG) 387.50p 1.23%
HSBC Holdings (HSBA) 1,112.40p 1.18%
Aviva (AV.) 687.00p 1.12%
Phoenix Group Holdings (PHNX) 692.00p 1.02%
Croda International (CRDA) 2,787.00p 1.01%

FTSE 100 - Fallers

Experian (EXPN) 3,349.00p -3.74%
3i Group (III) 4,061.00p -3.56%
Tesco (TSCO) 447.10p -3.20%
easyJet (EZJ) 464.70p -2.90%
Auto Trader Group (AUTO) 711.80p -2.41%
Compass Group (CPG) 2,468.00p -2.33%
Berkeley Group Holdings (The) (BKG) 4,024.00p -2.04%
Next (NXT) 14,300.00p -1.92%
Hiscox Limited (DI) (HSX) 1,370.00p -1.86%
Sainsbury (J) (SBRY) 338.20p -1.69%

FTSE 250 - Risers

Avon Technologies (AVON) 2,015.00p 8.33%
Smithson Investment Trust (SSON) 1,626.00p 6.41%
Marshalls (MSLH) 178.80p 3.95%
Kainos Group (KNOS) 971.00p 3.57%
Vietnam Enterprise Investments (DI) (VEIL) 755.00p 2.58%
Oxford Biomedica (OXB) 631.00p 2.44%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 465.00p 2.20%
Diversified Energy Company (DEC) 1,135.00p 2.16%
Mitie Group (MTO) 166.60p 2.08%
International Personal Finance (IPF) 206.00p 1.98%

FTSE 250 - Fallers

Baltic Classifieds Group (BCG) 234.00p -4.49%
Taylor Wimpey (TW.) 102.50p -3.12%
Blackrock Throgmorton Trust (THRG) 600.00p -1.80%
IP Group (IPO) 59.20p -1.66%
Currys (CURY) 131.60p -1.64%
Ashmore Group (ASHM) 163.50p -1.51%
Plus500 Ltd (DI) (PLUS) 2,918.00p -1.42%
BH Macro Ltd. GBP Shares (BHMG) 398.50p -1.24%
JTC (JTC) 1,302.00p -1.21%
Oxford Instruments (OXIG) 2,035.00p -1.21%