The FTSE 100 ended the week on a positive note on Friday as data showed the UK private sector speeded up in August and a soaring gold price supported miners.
The FTSE 100 index closed up 68.40 points, 0.6%, at 10,816.56. The FTSE 250 ended up 210.16 points, 0.9%, at 24,718.82, and the AIM All-Share closed up 7.87 points, 1.0%, at 811.96.
For the week, the FTSE 100 was up 0.6%, the FTSE 250 was down 0.6%, and the AIM All-Share was up 1.1%.
Private sector growth accelerates
In the UK, figures showed the private sector grew at a slightly faster pace in August, as the services economy shone.
The S&P Global flash composite purchasing managers' index rose to 52.5 points in August, a four-month high, from July's final tally of 52.2, beating FXStreet cited consensus of 51.6 points.
The composite PMI is calculated using the service and manufacturing sector data.
The services PMI rose to 52.8 according to the August flash, a six-month high, from 52.1 in July. The manufacturing PMI, however, eased to a five-month low of 51.5 from 51.9.
JPMorgan analyst Allan Monks said the report "sends another positive message on growth" and "points to modest upside risks to our (third quarter) growth forecast."
However, other data was not quite as positive, with retail sales weaker than expected last month, and public sector borrowing higher than forecast.
The Office for National Statistics said UK retail sales volumes increased 1.6% on-year in July, slowing from a 3.8% improvement in June. The latest reading was shy of the FXStreet cited consensus, which had forecast a 2.2% increase.
On-month, retail sales fell 0.5% in July, in line with expectations, after a 0.7% rise in June from May. June's reading was downwardly revised from a 1.0% rise.
Government borrowing and currency moves
Separate ONS figures showed government borrowing rose in July, "as spending growth outpaced receipts despite strong self-assessed income tax revenue."
Public sector net borrowing totalled £1.8 billion last month, rising from £1.07 billion a year prior. It faded from £12.78 billion in June. Borrowing in July is typically lower than other months due to the timing of additional receipts from self-assessed income tax.
Nonetheless, the latest reading was above the FXStreet cited forecast which had predicted an on-year fall in borrowing to about £300 million.
The pound traded at 1.3625 US dollars on Friday afternoon, down from 1.3634 dollars at the equities close on Thursday. Against the euro, sterling eased to 1.1672 euros from 1.1676 euros.
On Wall Street, stocks opened higher after a report showed US business activity performed better than anticipated in August, boosted by the service sector.
The headline S&P Global flash US composite purchasing managers' output index improved to 56.0 points in August, a 52-month-high, from 54.5 points in July.
S&P Global noted: "Jobs were added at the fastest rate since the start of last year as increasingly confident companies took on more staff to meet higher demand. Business growth expectations struck a nine-month high. Price pressures meanwhile moderated."
The Dow Jones Industrial Average was up 0.7%, the S&P 500 index was 0.4% higher, while the Nasdaq Composite rose 0.3%.
European markets and gold rally
In Europe equities on Friday, the CAC 40 in Paris closed up 0.4%, while the DAX 40 in Frankfurt advanced 0.6%.
Private sector activity also picked up in the eurozone in August. The flash S&P Global eurozone PMI composite output index registered 52.1 points in August, edging up from 52.0 points in July with the services and manufacturing PMI readings ahead of consensus.
The euro stood lower at 1.1673 dollars against 1.1678 dollars. Against the Japanese yen, the dollar was higher at 159.03 yen, compared to 158.87 yen.
Elsewhere, bond yields remained elevated as enthusiasm for the US Treasury's intervention faded.
The yield on the US 10-year Treasury widened to 4.74% on Friday from 4.70% at the time of the London equity close on Thursday. The yield on the US 30-year Treasury stretched to 5.27% from 5.26%.
Dan Coatsworth, head of markets at AJ Bell, said the relief offered by the intervention earlier in the week has proved "short-lived."
"Underlying factors, like the sheer scale of US government borrowings, having crossed the £40 trillion dollars (£29.3 trillion) threshold, the size of deficits across the West, and the ongoing push higher in oil prices, mean yields have ticked up once more," he added.
On the FTSE 100, rising metal prices boosted miners with Antofagasta, Endeavour Mining and Anglo American, up 5.4%, 4.1% and 2.6% respectively.
Gold traded at 4,605.34 dollars an ounce on Friday, up from 4,518.45 dollars on Thursday. The price of silver rose 2.1% and copper climbed 1.6%.
Goldman Sachs analyst Lina Thomas said renewed elevated call option demand raises volatility and upside price risk.
Ms Thomas explained that gold call option demand has risen sharply amid renewed demand for global macro-policy hedges, creating a mechanical price amplifier to both the upside and downside.
"As gold prices approach key strike levels, dealers that have sold these calls may be forced to buy gold to hedge their exposure, accelerating the rally. Conversely, any pullback in the gold price can prompt dealers to unwind those hedges, adding selling pressure and amplifying the price downside," Ms Thomas added.
"We therefore continue to see significant upside risk to our 4,900 dollar per ounce end-2026 gold forecast, but also greater two-sided volatility to the gold rally," the Goldman analyst added.
Brent oil for October delivery traded at 94.08 dollars a barrel on Friday, up from 93.53 dollars late on Thursday.
Stock movers and outlook
Back on the FTSE 100, JD Sports Fashion rebounded 5.6% after Thursday's slump when the sports retailer cut profit guidance.
Analysts at Berenberg said they remain "constructive on JD's recovery prospects should consumer and product cycles turn back in the company's favour." The broker also noted JD's continuing low valuation.
On the FTSE 250, Gamma Communications rose 12% after it named Waterland Private Equity Investments and Giacom Group as potential suitors.
Waterland is a Bussum, Netherlands-based private equity firm and is acting in concert with London-based telecommunications service provider Giacom, which Gamma had previously disclosed as interested in buying parts of the company.
Domino's Pizza climbed 5.2% as Shore Capital upgraded to "buy" from "hold."
"We now see a more attractive risk-reward, supported by a cleaner strategy, early evidence of operational delivery and a cash profile that should support investment and deleveraging," said analyst Katie Cousins.
But Hunting plunged 14% as it reported a decline in half-year revenue and cut its 2026 guidance, as the Middle East conflict "caused some delays to tendering."
The biggest risers on the FTSE 100 were: JD Sports Fashion, up 4.46p at 84.54p; Antofagasta, up 199.0p at 3,905.0p; Endeavour Mining, up 184.0p at 4,680.0p; Autotrader, up 19.4p at 546.8p; and 3i, up 98.0p at 2,891.0p.
The biggest fallers on the FTSE 100 were: National Grid, down 15.50p at 1,171.0p; Melrose Industries, down 6.0p at 470.3p; Babcock International, down 13.5p at 1,104.5p; BAE Systems, down 19.0p at 2,126.0p; and Shell, down 30.5p at 3,409.5p.
Monday's global economic calendar has the Chicago Fed national activity index. Later in the week, US personal consumption expenditures inflation data will be released while Federal reserve chair Kevin Warsh is scheduled to speak at the Jackson Hole symposium on Friday.
There are no significant events scheduled in Monday's UK corporate calendar. Later in the week, Asia-focused insurer Prudential reports half-year results.
