Last checked at 
FTSE 100 hits 2-week high
*
UK scraps water pollution rules; boosts homebuilders
*
Bunzl gains on upbeat annual profit outlook
*
UK shop price inflation at 10-month low
*
Homebuilders mark best day in over a month
*
FTSE 100 surge 1.7%, FTSE 250 up 1.9%
Aug 29 (Reuters) - The exporter-heavy FTSE 100 index hit a two-week high on Tuesday, following an extended weekend as miners rose on policy optimism from China, while Britain's plan to scrap some water pollution rules boosts homebuilders.
The blue chip index surged 1.7%, while the domestically focused FTSE 250 rose 1.9%. Both indexes had their best day in six weeks.
The London Stock Exchange was closed on Monday due to a summer bank holiday.
The housing index shot up 3.9%, leading sectoral gains after Britain said it would remove some European Union rules it had retained post-Brexit that were meant to curb water pollution, to enable thousands of new homes to be built.
Homebuilders Persimmon, Crest Nicholson and Barratt Developments rose between 4.1% and 7.2%.
Industrial metal miners rose 2.5%, tracking metal prices that gained after top consumer China announced measures to support its housing and stock markets.
"Whether the medicine Beijing is doling out will deal with the causes rather than just the symptoms of its economic challenges is debatable, but for the time being it is at least doing enough to restore sentiment," AJ Bell investment director Russ Mould said.
Meanwhile, data showed prices in British store chains rose in August at the slowest pace in nearly a year, offering further relief for consumers hit by high inflation and for the Bank of England which is trying to quash it.
Shares of Bunzl climbed 3.1% after the British business supplies distributor hiked its annual adjusted operating profit forecast.
Drugmakers Dechra and Hikma, along with retailer Marks & Spencer and technical products provider Diploma are set to join FTSE 100 in September, indicative changes announced by FTSE Russell showed last week.
The actual review will be carried out using data as at market close on Tuesday and confirmed changes will be announced after the close on Aug. 30. (Reporting by Siddarth S and Khushi Singh in Bengaluru; Editing by Sherry Jacob-Phillips, Sohini Goswami and Alison Williams)
