By Peter Hobson and Alistair Smout
LONDON (Reuters) - Britain's top share index edged downwards to a 2-week low on Friday as investors avoided risky bets heading into the weekend of Italy's constitutional referendum, with bank shares leading the declines.
The blue-chip FTSE 100 closed down 0.3 percent, taking its loss for the week to 1.6 percent and snapping a three-week winning streak.
Royal Bank of Scotland (LON:RBS) and Barclays (LON:BARC) were among the steepest fallers, down 3.2 percent and 2.8 percent respectively ahead of Sunday's constitutional reform vote in Italy. Prime Minister Matteo Renzi is expected to lose the referendum, throwing the future of his government into question and jolting Italy's already shaky banking system.
Traders said that while a "no" vote would be no surprise, investors were loath to buy stocks heading into a weekend that also sees the re-run of the presidential election in Austria, where a far-right candidate is making a strong bid for victory.
"There's a lot of repositioning going on today in front of what happens over the weekend," said Zeg Choudhry, managing director of brokers Lontrad.
That benefited defensive stocks such as consumer staples and utilities that offer more reliable incomes and dividends.
Utility company SSE (LON:SSE) and consumer goods firms Imperial Brands (LON:IMB) and Associated British Foods (LON:ABF) were up by between 1.4 to 1.7 percent.
Imperial Brands was also boosted by Goldman Sachs (NYSE:GS), which reiterated its "buy" rating and put the firm on its conviction list, turning back two days of steep losses for the stock.
Rising gold prices meanwhile lifted precious metals miners, with Rangold Resources gaining 2.1 percent and Fresnillo (LON:FRES) up 1.4 percent.
The FTSE battled back from a weaker start after U.S. non-farm payroll data showed 178,000 jobs were added in the public and private sectors in November, slightly more than expected, and the unemployment rate dropped to a more than nine-year low.
The data reassured investors that the U.S. economy was on track, but also dampened fears of overheating that could prompt more aggressive policy tightening by the Federal Reserve.
"The market over a long period of time has had a preference for a Goldilocks economy. Not too hot to provoke inflation and stiff interest rate increases, and not to cold to lead to a recession," said Russ Mould, investment director at AJ Bell.
Other outperformers on the British stock market were construction and real estate stocks.
Real estate holding companies Land Securities Group and British Land gained 2.2 percent and 1.3 percent respectively, while mid-cap housebuilder Berkeley rose 8.4 percent after posting a profit rise that traders said was above expectations.
Berkeley's stock is down around 20 percent since Britain's vote in June to leave the European Union, and the London-centric builder has seen a 20 percent fall in demand.
"Overall we think this is a decent update and the longer term guidance over PBT should give comfort there is not a cliff edge in profits after the following two years," analysts at Numis said in a note, raising the stock to "buy" from "add".
Engineering firm Rolls-Royce (LON:RR) fell 3.1 percent a day after saying it would cut a further 800 jobs in its marine business in response to weak customer demand.