The FTSE 100 concluded a turbulent trading week in a muted fashion on Friday, registering a marginal decline despite a wave of unexpectedly positive economic data from the United Kingdom. The benchmark index closed down 6.61 points, or 0.1%, at 10,143.44, while the FTSE 250 fell 0.2% to 23,317.53. In contrast, the AIM All-Share index managed a 0.6% gain, closing at 822.75. Over the course of the week, the FTSE 100 retreated by 0.9%, the FTSE 250 remained essentially flat, and the AIM-All Share posted a robust 2.5% increase.
UK Economic Data Provides a Glimmer of Optimism
Market attention in London was firmly fixed on a batch of economic releases that painted a brighter picture of the UK economy as 2026 commenced. The Office for National Statistics reported that retail sales volumes unexpectedly rose by 0.4% in December, defying forecasts which had anticipated a 0.1% decline. This followed a revised 0.1% fall in November.
Adding to the cautiously optimistic sentiment, the GfK consumer confidence index improved slightly in January. The overall score rose to minus 16 points from minus 17 in December, matching consensus expectations, bolstered by stronger public expectations for personal finances over the coming year.
Business Activity Accelerates to Multi-Month Highs
Completing the trio of encouraging signals, flash data from S&P Global revealed an acceleration in growth across the UK's service and manufacturing sectors. The UK purchasing managers' composite output index surged to a 21-month high of 53.9 points in January, up from 51.4 in December and easily surpassing the consensus forecast of 51.7.
The flash services business PMI improved markedly to 54.3 points, while the manufacturing PMI climbed to a 17-month high of 51.6 points. "With the turn of the year, we are seeing encouraging signs from the UK economy," remarked Deutsche Bank chief economist Sanjay Raja, noting stronger survey data and a pickup in retail spending.
JPMorgan analyst Allen Monks observed that the surge in the PMI might typically correlate with annualised GDP growth of around 1.9%. However, he urged caution, noting a similar surge last August had reversed sharply. "It's hard to have much faith in the UK survey until it sustains a shift higher," Monks added, though he acknowledged the retail sales and consumer confidence figures were supportive of the growth outlook.
Precious Metals and Currency Movements
On the FTSE 100, gold miners Fresnillo and Endeavour Mining were among the notable gainers, rising 2.1% and 2.2% respectively. This came as gold prices continued their remarkable ascent, quoted at $4,984.07 an ounce on Friday after hitting another record high and approaching the symbolic $5,000 mark. Silver prices also surged, rising 4.8% to head above $100 an ounce.
David Morrison, senior market analyst at Trade Nation, commented on the precious metals rally. "Concerns over US public finances, political pressure on the Fed, and lingering global risks keep gold well bid on dips," he said. Regarding silver, Morrison described its performance as "extraordinary," suggesting the market might be in the midst of a blow-off top driven by supply shortage fears and a massive short squeeze, though he warned of increasing risks at elevated levels.
The firm UK data provided support for sterling, which was quoted higher at $1.3567 at the London equities close. The pound found further impetus from comments by Monetary Policy Committee member Megan Greene, who argued that looser monetary policy in the US could exacerbate inflationary pressures, potentially warranting a slower withdrawal of monetary policy restriction in the UK.
Sector Performance and Corporate News
Oil majors BP and Shell gained 1.6% and 0.5% respectively, buoyed by a rising oil price after reports the US threatened to curb funding for Iraqi oil sales. Brent crude traded higher at $65.76 a barrel.
In contrast, the insurance sector faced headwinds. Aviva fell 5.2%, while Admiral Group extended its losing run, shedding 5.8% on Friday after being downgraded by Goldman Sachs and RBC Capital Markets earlier in the week.
Elsewhere, drinks group C&C saw its shares tumble 9.3% after reporting weak trading in the pre-Christmas period, attributing it to tepid consumer confidence amid UK budget concerns. Gambling firms were also under pressure, with Rank down 4.7% and Evoke sliding 2.5% after Deutsche Bank moved both to "hold" from "buy" following tax changes announced in the November budget.
Global Market Context
In European equities, the CAC 40 in Paris closed down 0.1%, while the DAX 40 in Frankfurt ended 0.2% higher. At the time of the London close, New York markets were mixed: the Dow Jones Industrial Average was down 0.5%, the S&P 500 was 0.2% higher, and the Nasdaq Composite climbed 0.6%.
Looking ahead, Monday's global economic calendar features the Ifo business climate report in Germany and US durable goods orders data. Later in the week, interest rate decisions are due from both the US Federal Reserve and the Bank of Canada. The UK corporate calendar for the coming week includes full-year results from Lloyds Banking Group and trading statements from Sage Group and Antofagasta.
