Stock prices in London rallied into the close after a report that peace talks could resume between the US and Iran.
The news, which broke as the London market was closing for the week, added to a generally brighter mood after positive domestic economic data.
The FTSE 100 index closed up 97.06 points, 0.9%, at 10,736.23. The FTSE 250 ended up 174.16 points, 0.7%, at 23,801.49, and the AIM all-share closed up 4.22 points, 0.6%, at 772.98.
For the week, the FTSE 100 rose 1.3%, the FTSE 250 climbed 0.8%, and the AIM all-share advanced 1.6%.
In London, investors were cheered by stronger-than-forecast retail sales figures, a pick-up in private sector activity and an improvement in consumer confidence.
According to a purchasing managers’ index reading, the UK private sector returned to growth at the start of the third quarter, amid a slight rise in new work.
The S&P Global flash composite purchasing managers’ index (PMI) rose to 52.1 points in July from 49.3 in June, a three-month high, beating FXStreet-cited market consensus of 49.7 points.
The composite PMI is made up of the services and manufacturing PMIs.
The services PMI also returned to growth territory and similarly hit a three-month high, rising to 51.8 points in July from June’s final tally of 48.8.
Separate figures from the Office for National Statistics showed UK retail sales were stronger than expected last month, with annual growth spiking to the loftiest level since January.
UK retail sales volumes surged 4.2% year-on-year in June, picking up speed from 3.5% in May. The June figure topped the FXStreet-cited consensus, which had pencilled in a slowdown in annual retail sales growth to 2.3%.
It was the chunkiest annual surge since a 4.6% rise in January.
Completing the good news, the GfK UK consumer confidence index rose to minus 17 points in July from minus 23 points in June, again ahead of consensus.
Neil Bellamy, consumer insights director at GfK, said: “Hot on the heels of the summer heatwaves, July has delivered a wave of optimism…The lion’s share of the improvement is in the economy, with a 10-point advance in how consumers view the past year and an eight-point gain for the next 12 months.
Allan Monks, at JPMorgan, said the pick-up in consumer confidence was likely influenced by a number of temporary factors, including hot weather, the World Cup and political changes, adding that these effects are likely to fade.
Nonetheless, Mr Monks said the overall message of the data releases is one of “growth resilience”.
The figures come ahead of next week’s Bank of England interest rate call.
In June, the BoE’s Monetary Policy Committee voted 7-2 to leave the bank rate at 3.75%. A hold is expected this time around too, despite the renewed hostilities in the Middle East. Barclays expects guidance to be “limited, cautious and non-committal”.
Mr Monks predicted a 6-3 vote this time around “with a little less push back against future rate hikes from the centre-ground”.
While he does not expect the BoE to “overreact” to geopolitical developments over the past week or so, he says the “balance of risks continues to shift in a hawkish direction”.
The pound was higher at 1.3342 dollars on Friday afternoon from 1.3303 at the equities close on Thursday. Against the euro, sterling was higher at 1.1717 euro from 1.1696 a day prior.
Also supporting stocks, a drop in oil prices took Brent crude back below 100 dollars per barrel.
Late in Friday’s trading session in London, Reuters reported, citing three Pakistani sources, that Pakistan is considering a path toward establishing new peace negotiations between the US and Iran. The decision came after a push initiated by China, the report said.
The report saw oil price falls accelerate. Brent oil for September delivery traded lower at 95.49 dollars a barrel on Friday afternoon, from 100.98 late on Thursday.
In European equities on Friday, the CAC 40 in Paris closed up 0.9%, while the DAX 40 in Frankfurt ended 1.4% higher.
Stocks in New York were higher. The Dow Jones Industrial Average was up 0.7%, the S&P 500 index was 0.6% higher, and the Nasdaq Composite edged up 0.1%.
Tariffs were back on the agenda, as the US announced a fresh round of levies on a list of 60 countries ranging between 10% and 12.5%. The EU and the UK will both be subject to a 10% tariff.
AJ Bell investment director Russ Mould said while the new tariffs will not come as a “complete shock to markets, it is nonetheless another unwelcome source of uncertainty”.
The yield on the US 10-year Treasury narrowed to 4.66% on Friday from 4.71% on Thursday. The yield on the US 30-year Treasury fell to 5.14% from 5.18%.
The biggest risers on the FTSE 100 were Relx, up 117.0p at 2,568.0p, Sage Group, up 36.6p at 858.2p, Rolls Royce, up 56.6p at 1,415.6p, JD Sports Fashion, up 3.1p at 88.9p and Metlen Energy & Metals, up 1.4p at 44.0p.
The biggest fallers on the FTSE 100 were Airtel Africa, down 11.4p at 334.2p, BP, down 7.5p at 548.4p, Vodafone, down 1.5p at 114.6p, Shell, down 38.5p at 3,305.5p and Babcock International, down 13.0p at 1,121.0p.
Monday’s economic calendar has the Ifo business climate in Germany and durable goods orders data in the US.
Later in the week, interest decisions are due in the US, UK and Japan, plus inflation figures in Australia and the eurozone.
On Monday’s UK corporate calendar, drugs maker AstraZeneca reports half-year results, while telecoms firm Vodafone delivers a trading update.
Contributed by Alliance News