UK stocks gain on consumer staples, defence; budget borrowing report lifts sentiment

Oct 14 (Reuters) - UK stocks rose on Wednesday, lifted by consumer staples and defence stocks, as investors weighed a report that Finance Minister John Healey would avoid more borrowing in the budget later this month.

The blue-chip FTSE 100 index .FTSE rose 0.47% to 10,700.08 points by 10:06 AM GMT, while the midcap FTSE 250 .FTMC climbed 0.8%.

• UK's Finance Minister John Healey is expected to fund new initiatives through higher taxes or spending cuts rather than more borrowing, the FT reported on Wednesday

• Separately, the IMF backed Britain's fiscal strategy, urging it to "stay the course" on deficit reduction, in contrast with other big economies that have little plan to reduce borrowing at a time of rising interest rates

• Meanwhile, the Bank of England Chief Economist Huw Pill said he is sceptical of market expectations for four rate hikes over the next year, despite growing inflation risks

• "The BOE's caution is well established, and given the weakness of the labor market, any hike would be framed as insurance," said Geoff YU, senior EMEA markets strategist at BNY

• Among consumer staple firms, Unilever ULVR.L and British American Tobacco BATS.L gained 1% each, while spirits maker Diageo DGE.L was up 1.6%

• Luxury fashion firm Burberry BRBY.L gained 2.9%, the most on the FTSE 100

• Big Yellow rose 5.8%, after activist investor Ancora called for a strategic review, saying the self-storage firm trades at an unjustified discount and could attract takeover interest

• Admiral ADML.L slipped 1.5% after Peel Hunt cut its price target, warning the insurer's UK motor policy growth could slow as it raises rates to protect margins

• The broader non-life insurers .FTNMX303020 slipped 1.1%

• Defence products maker Chemring climbed 3.8% after its Roke unit secured a partnership with a major US contractor, including an initial $16 million order and a minimum $170 million agreement over five years

• Investors await US inflation data later in the day, and UK August GDP figures on Thursday