Updated at 1632 GMT

By Sruthi Shankar and Nikhil Sharma

Nov 1 (Reuters) -The UK's FTSE 100 rebounded on Friday from near three-month lows touched in the prior session, as gains in Reckitt Benckiser helped offset concerns about inflation sparked by the first Labour government budget in 14 years.

The blue-chip FTSE 100 .FTSE rose 0.8% by 1632 GMT, with Reckitt RKT.L surging 7.4% after the consumer goods company, along with U.S.-based Abbott Labs ABT.N, was cleared of liability in a preterm formula case.

The midcap FTSE 250 index .FTMC edged up 0.5% but hovered near a three-month trough touched on Thursday as Britain's finance minister Rachel Reeves faced criticism after her first budget was heavy on spending, tax increases, and borrowing but light on economic growth.

The indexes logged weekly declines after the budget raised concerns about inflation pressures building again, prompting traders to scale back expectations of rate cuts from the Bank of England.

Investors stuck to bets that the BoE will cut rates by 25 basis points next week, but reduced the chance of a December cut to less than 50%. They also expect fewer rate cuts next year. 0#BOEWATCH

Data showed British factory activity contracted marginally last month for the first time since April, due to fewer new orders and a broader lack of optimism in the run-up to the budget.

Focus was also on the U.S. president election on Nov. 5, with some betting websites favouring Republican Donald Trump, although polls suggest Trump and Democratic candidate Kamala Harris remain neck and neck.

Among other stocks, Tesco TSCO.L rose 1.7% after Britain's biggest supermarket group said that it intended to return 700 million pounds ($902.51 million) to shareholders through an incremental share buyback.

Boohoo BOOH.L added 3.3% after the online fashion retailer appointed Dan Finley as its new CEO, effective immediately, marking a setback for top investor Frasers FRAS.L, which had attempted to appoint its controlling shareholder Mike Ashley to the role.

Reporting by Sruthi Shankar in Bengaluru; Editing by Tasim Zahid and Mike Harrison

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