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(Sharecast News) - London stocks closed lower on Friday as investors paused after a busy and volatile week, with gains capped as attention turned to a fresh surge in gold prices that pushed the yellow metal close to the $5,000-an-ounce mark.

The FTSE 100 was down 0.07% at 10,143.44, while the more domestically-focused FTSE 250 slipped 0.23% to 23,317.53.

As AJ Bell's Dan Coatsworth put it, "it's a calmer end to a chaotic week on the markets," noting that after recent swings "it's only natural for people to pause and take stock of events."

The bid for safety remained evident in precious metals, with gold continuing to attract inflows despite easing immediate market stress.

Coatsworth said the metal had "nudged ahead to trade ever closer to $5,000 an ounce as investors were reluctant to let go of their safety blanket, just in case Donald Trump woke up with another controversial idea."

That caution helped temper equity gains even as broader risk sentiment stabilised.

UK economic data helps underpin sentiment

Sentiment was underpinned by a raft of upbeat UK economic data.

The S&P Global flash UK PMI composite output index rose to 53.9 in January from 51.4 in December, its strongest reading since April 2024 and the ninth consecutive month above the 50 mark that separates expansion from contraction.

Services activity climbed to a 21-month high of 54.3, while manufacturing output also strengthened, with the PMI rising to 51.6.

Chris Williamson at S&P Global said businesses had "kicked up a gear" at the start of the year, pointing to resilient demand and optimism consistent with quarterly GDP growth approaching 0.4%, though he cautioned that job losses persisted as firms grappled with high costs.

PwC economist Jake Finney said the data suggested the economy had begun 2026 on a firmer footing, but warned that persistent cost pressures, particularly in services, could keep the Bank of England on hold in February.

Official figures also showed UK retail sales beat expectations in December, with volumes rising 0.4% against forecasts for a decline.

Patrick Munnelly at TickMill noted that "interpreting signals from this often-volatile series is no straightforward task," highlighting that while sales volumes rose 2.1% on a three-month annual basis in the fourth quarter, they still fell 0.3% quarter-on-quarter.

"The reality likely lies somewhere in between," he said, pointing to favourable weather and sporting events supporting food sales earlier in the year, while seasonal shifts such as Black Friday may have distorted more recent data.

The Office for National Statistics said strong demand for precious metals and higher supermarket sales helped offset weakness in non-food stores, with annual sales growth accelerating to 1.3%, though volumes remained below pre-pandemic levels.

ONS statistician Hannah Finselbach highlighted strong online jewellery sales driven by demand for gold and silver, while AJ Bell's Danni Hewson said the headline increase masked a difficult Christmas for many high-street retailers amid cautious consumer spending.

Consumer confidence, however, remained subdued.

GfK's long-running index edged up one point to -16 in January, marking a decade in negative territory.

Munnelly observed that while the headline move was modest, "perceptions of personal financial situations improved more significantly than the headline figure suggests," even as households remained wary about the broader economic outlook.

GfK's Neil Bellamy said consumers were showing resilience rather than optimism, focusing on what they could control while remaining unconvinced about the wider economy.

Broader global signals were meanwhile mixed.

Asian markets advanced as the dollar continued to weaken, with investors increasingly rotating into non-US assets.

Munnelly said "precious metals also soared to unprecedented levels," with a weaker dollar helping push gold to an all-time high of over $4,965 an ounce.

In Japan, stocks rose and the yen softened after the Bank of Japan kept its policy rate unchanged at 0.75% while upgrading growth and inflation forecasts, a move that also weighed on bond futures.

Munnelly noted that signs were emerging that "investors are increasingly pulling away from US assets," with record flows into emerging-market funds adding further pressure to the dollar.

BAE Systems higher, SSP Group reverses gains

On London's equity markets, defence stocks were in focus, with BAE Systems trading higher as investors continued to favour names that have performed strongly over the past year.

Coatsworth said the FTSE 100 had been supported as investors "loaded up on three names that have served them well over the past year - Rolls-Royce, Endeavour Mining and BAE Systems."

Shell rallied after a Reuters report said the oil major was considering a sale of its assets in Argentina's Vaca Muerta shale play.

Watches of Switzerland was higher after it said late on Thursday that it had bought Texas-based Deutsch & Deutsch, a family-owned luxury watch and jewellery retailer that had been operating since the 1920s.

SSP Group reversed earlier gains despite backing full-year guidance and reporting a 5% rise in first-quarter like-for-like sales.

Babcock International edged lower after confirming chief executive David Lockwood will retire at the end of 2026, a move Coatsworth said might allow Lockwood "half a smile" given the shares had risen more than fivefold since he took the role in 2020.

C&C Group tumbled after warning on profits amid weak consumer confidence, with Coatsworth describing it as "a tough time to be running" the drinks group as profit warnings returned, while Rank Group slid after Deutsche Bank downgraded the stock to 'hold' and cut its price target sharply.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 10,143.44 -0.07%

FTSE 250 (MCX) 23,317.53 -0.23%

techMARK (TASX) 5,933.79 0.76%

FTSE 100 - Risers

Beazley (BEZ) 1,152.00p 3.23%

Glencore (GLEN) 501.00p 2.21%

BAE Systems (BA.) 2,027.00p 2.12%

Fresnillo (FRES) 4,168.00p 2.06%

Antofagasta (ANTO) 3,584.00p 1.91%

BP (BP.) 443.65p 1.57%

Rio Tinto (RIO) 6,576.00p 1.39%

Centrica (CNA) 184.10p 1.35%

Anglo American (AAL) 3,378.00p 1.08%

Unilever (ULVR) 4,864.00p 1.00%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,195.50p -6.20%

Admiral Group (ADM) 2,650.00p -5.76%

Aviva (AV.) 619.40p -5.17%

easyJet (EZJ) 483.00p -2.98%

International Consolidated Airlines Group SA (CDI) (IAG) 418.30p -2.79%

Spirax Group (SPX) 7,200.00p -2.78%

Flutter Entertainment (DI) (FLTR) 12,990.00p -2.70%

Smurfit Westrock (DI) (SWR) 3,054.00p -2.65%

Informa (INF) 913.80p -2.54%

JD Sports Fashion (JD.) 82.64p -2.34%

FTSE 250 - Risers

Me Group International (MEGP) 139.40p 4.65%

Hochschild Mining (HOC) 702.00p 3.69%

Watches of Switzerland Group (WOSG) 534.00p 2.99%

Ceres Power Holdings (CWR) 347.20p 2.72%

NCC Group (NCC) 138.80p 2.67%

Harbour Energy (HBR) 211.80p 2.62%

Foresight Environmental Infrastructure Limited (FGEN) 71.90p 2.28%

Endeavour Mining (EDV) 4,366.00p 2.15%

Oxford Biomedica (OXB) 871.00p 2.11%

CMC Markets (CMCX) 329.00p 2.02%

FTSE 250 - Fallers

C&C Group (CDI) (CCR) 114.40p -11.04%

B&M European Value Retail S.A. (DI) (BME) 161.60p -7.18%

Wizz Air Holdings (WIZZ) 1,318.00p -4.77%

Rank Group (RNK) 93.80p -4.67%

Hays (HAS) 46.60p -3.40%

Ocado Group (OCDO) 246.40p -3.22%

Close Brothers Group (CBG) 518.00p -2.91%

Aston Martin Lagonda Global Holdings (AML) 62.00p -2.13%

Frasers Group (FRAS) 681.50p -2.01%

Carnival (CCL) 2,097.00p -2.01%