UK stocks rise as Reeves' tax-raising budget soothes some nerves

By Utkarsh Hathi

Nov 26 (Reuters) - UK stocks climbed on Wednesday, boosted by gains in financials and mining stocks, as finance minister Rachel Reeves announced a big tax-raising budget.

The blue-chip FTSE 100 .FTSE closed 0.9% higher, logging its best day in two weeks. The domestically focused FTSE 250 .FTMC climbed 1.2%, its best day in more than a month.

Reeves delivered a budget that will take more tax from workers, people saving for a pension and from investors to give herself more room for meeting her borrowing targets.

In a release first reported by Reuters , the Office for Budget Responsibility said the headroom now stood at almost 22 billion pounds ($28.9 billion) in five years' time.

UK 30-year gilt yields GB30YT=RR - more sensitive to long-term fiscal concerns - fell 10.5 bps to 5.21%, in their biggest one-day drop since April, suggesting investors were largely comfortable with the budget plan.

"What the market is very much reacting to is the fact that the Chancellor has increased her fiscal buffer... She has pretty much doubled it and that's something that the market is really latching onto and it's calming the bond market," said Fiona Cincotta, senior market analyst at City Index.

Heavyweight banks .FTNMX301010 advanced 2.1%, with Standard Chartered STAN.L up 2.8%, while Barclays BARC.L added 3.2%, after the budget spared banks from fresh targeted taxes.

Precious metal miners .FTNMX551030 climbed 5.1% as gold prices climbed to their highest in more than a week after benign U.S. economic data reinforced expectations of a Federal Reserve interest rate cut next month.

Fresnillo FRES.L rose 5.2%, Endeavour Mining EDV.L added 4.8%, while Hochschild HOCM.L gained 6%.

Industrial miners .FTNMX551020 gained about 1.5%, tracking higher copper prices. Anglo American AAL.L and Antofagasta ANTO.L rose 3.2% and 2.1%, respectively.

Homebuilders .FTNMX402020 dropped 1% after Wednesday's budget increased tax on high-value properties. Berkeley group BKGH.L fell 2.9%.

Also in focus was renewed talk of a Russia-Ukraine peace deal after Ukrainian President Volodymyr Zelenskiy signalled readiness to push forward a U.S.-backed framework to end the war. Aerospace and defence .FTNMX502010 stocks gained with BAE Systems BAES.L up 1.4%.

Beverages .FTNMX451010 fell 0.7%, with Diageo DGE.L losing 1%.