By Muvija M and Shashwat Awasthi
(Reuters) - London's FTSE 100 shed most of its earlier gains but still managed to close higher on Tuesday, as sentiment was supported by a surge in safety equipment maker Halma and hopes of more stimulus from economic powerhouse China.
Continuing optimism after polls showed Conservatives in the lead ahead of a December snap election helped domestic stocks outperform. The FTSE 250 <.FTMC>, which had jumped over 1% earlier, ended with a 0.4% gain, still hovering at a 14-month high.
Markets are viewing a prospective Tory victory as a positive on hopes that Prime Minister Boris Johnson, with a majority in parliament, will be able to reduce uncertainty by delivering Brexit on or before the Jan. 31 deadline.
The blue-chip index <.FTSE> added 0.2% thanks in part to Halma <HLMA.L>, which climbed 8.5% after an upbeat half-year report. Rival Intertek <ITRK.L> also advanced 3.7%.
Asia-focused banks HSBC <HSBA.L> and Prudential <PRU.L> also boosted the blue-chip bourse after China's surprise lending rate cut spurred bets that more fiscal easing would follow.
On the Sino-U.S. trade front, a CNBC report on Monday termed Beijing's mood about a deal as "pessimistic". This was followed by Washington granting a 90-day extension allowing U.S. firms to continue doing business with China's Huawei.
With a plethora of conflicting headlines on where talks stand and how much progress has been made, traders are still awaiting concrete details before making further bets.
"Traders have failed to get excited today as the trade spat seems to have reached a standstill," CMC Markets analyst David Madden wrote.
Among mid-caps, Puretech Health <PRTC.L> led gains as it soared 16.5%, a day after a schizophrenia drug from its affiliate Karuna Therapeutics <KRTX.O> met the main goal in mid-stage trial.
That was complemented by a 5.3% rise in budget airline easyJet <EZJ.L> after it posted annual profit towards the top end of its expectations. The carrier also announced its intention to operate net-zero carbon flights across its network.
"While headwinds from fuel are set to continue, the outlook is for a more supportive unit revenue environment," Liberum analysts wrote.
Though outsourcing firm Equiniti <EQN.L> booked its worst day on record after a profit warning and tumbled 13%, the FTSE 250 still handily outperformed the broader European benchmark <.STOXX>.
Small-cap lights manufacturer Dialight <DIAL.L> plunged almost 20% to its lowest in nearly a decade as the ongoing U.S.-China trade war forced it to warn on profits.
(Reporting by Muvija M and Safia Infant in Bengaluru; Editing by Bernard Orr, Shailesh Kuber and Mark Heinrich)