The initial promise of the FTSE 100 faded on Friday amid downbeat economic growth figures and fresh US technology weakness.
The FTSE 100 index closed down 54.1 points, or 0.6%, to 9,649.03.
It had previously traded as high as 9,761.47.
The FTSE 250 finished 24.45 points higher, or 0.1%, at 21,876.55, and the AIM All-Share ended up 3.70 points, or 0.5%, at 751.36.
For the week, the FTSE 100 fell 0.2%, the FTSE 250 fell 0.9% and the AIM All-Share fell 0.2%.
Sentiment was hit by news that the UK economy contracted in October, according to figures from the Office for National Statistics.
Gross domestic product is estimated to have fallen 0.1% in October, the same as in September, missing the market consensus cited by FXStreet of a 0.1% increase.
Services production fell 0.3%, while construction production fell 0.6%.
Production, however, increased by 1.1%.
Citi analyst Callum McLaren-Stewart called the data “an unsurprising surprise.”
“A ruling in October may not be the most surprising result.
“Pre-budget uncertainty, and particularly the degree of speculation before the event, can probably explain the error in relation to the forecasts,” he said.
“For households, the prospect of income tax increases (which was still very much in place during October) would likely have dampened consumer spending,” the Citi analyst said, while, on the business side, “the associated lack of clarity over which sectors needed to be taxed would likely have delayed/slowed down investment decisions.”
Berenberg analyst Andrew Wishart fears that some of the slowdown in the UK economy may be due to underlying issues rather than just budget uncertainty.
“We suspect the culprit is deteriorating fundamentals rather than a budget-related setback in confidence, so a recovery appears unlikely in the near term,” Wishart said.
The data was seen as cementing a quarter-point interest rate cut at next week's Bank of England Monetary Policy Committee meeting.
“Not that there was any doubt, but today's data essentially guarantees that the Bank of England will cut rates again next week.
“Instead, the focus will be on the rate guidance in 2026.
“Any dovish tone hinting at further easing could bode poorly for the pound,” said Ebury analyst Matthew Ryan.
McLaren-Stewart agrees that the data “clearly supports the consensus in favor of a cut.”
“However, we anticipate that (the Bank of England) will be forced to cut rates below the current price in 2026, requiring a terminal rate below 3%, supported by a weaker GDP outlook,” he added.
The British pound fell after the figures, after recovering in recent days.
The pound was trading lower at $1.3356 at the close of the London Stock Exchange on Friday, down from $1.3416 on Thursday.
The euro stood at $1.1739, down from $1.1746.
Against the yen, the dollar was trading higher at 155.69 yen against 155.24 yen.
In Europe on Friday, the CAC 40 in Paris closed down 0.1%, while the DAX 40 in Frankfurt closed down 0.5%.
New York stocks were down at the time of the London stock close.
The Dow Jones Industrial Average was down 0.7%, the S&P 500 index was down 1.4%, while the Nasdaq Composite was down 2.1%.
Tech stocks were firmly in the red again, as Broadcom fell 11% after results fell short of lofty expectations, while Oracle fell another 4.6%.
The yield on the 10-year US Treasury bond was quoted at 4.19%, down from 4.12% on Thursday.
The 30-year US Treasury yield was at 4.86%, down from 4.77%.
Supporting the dollar and pushing yields higher, comments from two officials who voted against the Federal Reserve's decision to lower interest rates this week.
Chicago Fed President Austan Goolsbee had joined Kansas City Fed President Jeffrey Schmid in pushing to keep rates unchanged at the central bank's two-day policy meeting, which ended Wednesday.
“I think we should have waited for more data, especially on inflation, before lowering rates further,” Goolsbee said in a statement Friday.
In a separate statement, Schmid, who also pushed for no rate cuts at the Federal Reserve's October meeting, said: “Right now, I see an economy that is showing momentum and inflation that is too high, suggesting that policy is not too restrictive.”
Additionally, Federal Reserve Bank of Cleveland President Beth Hammack said she would prefer interest rates to be a little more restrictive to continue putting pressure on inflation, which is still too high.
Back in London, InterContinental Hotels Group rose 2.3% as Jefferies moved from “hold” to “buy”, but Whitbread fell 2.2% as the broker moved the Premier Inn owner the other way, to “hold” from “buy”.
Separately, 1Spatial soared 45% after accepting in principle a proposed £87.1 million bid from VertiGIS, a portfolio company of London-based private equity firm Battery Ventures.
The Cambridge, England-based location master data management software company said the cash offer would value each 1Spatial share at 73 pence.
VertiGIS confirmed that it has completed commercial due diligence, has a clear understanding of 1Spatial's business and requires only limited confirmatory diligence to proceed to make a firm offer.
But Card Factory plunged 27% after cutting its profit forecast as it said weak retail footfall was hurting its sales performance in UK stores.
The Wakefield, England-based retailer of greeting cards, gifts and celebration items said it expects an adjusted pre-tax profit of between £55 million and £60 million for the 2026 financial year, which ends Jan. 31, if current trading trends persist.
This is down from the company's previous guidance, which was for mid-to-high single-digit percentage growth in adjusted profit before tax of £66.0 million in financial year 2025, approximately £70 million.
Card Factory attributed weak consumer confidence to lower footfall on the street, which has persisted into its “most important” trading period.
Brent oil was trading at $61.30 a barrel at the close of the London Stock Exchange on Friday, up from $60.91 on Thursday.
Gold was trading at $4,291.08 an ounce on Friday, down from $4,254.97.
The biggest risers on the FTSE 100 were Burberry, up 54.50p to 1,272.5p, Ashtead Group, up 128.0p to 5,138.0p, BT Group, up 3.7p to 180.5p, Intercontinental Hotels Group, up 185.0p pence to 10,235.0 pence and Fresnillo, with an increase of 46.0 pence to 1,272.5 pence. 2,904.0p.
The biggest fallers on the FTSE 100 were St James's Place, down 49.0p to 1,316.5p. at 3,179.0p.
Monday's economic calendar has CPI figures in Canada.
Decisions on interest rates in Europe, Japan and the United Kingdom will be made later in the week. Additionally, US non-farm payrolls figures will be released, along with UK and US retail sales and inflation data.
Next week's UK corporate calendar has delayed travel retailer WH Smith's annual results and electrical goods retailer Currys' half-year figures.
Contributed by Alliance News.
