By Francesco Canepa
LONDON (Reuters) - The FTSE 100 was on track for its biggest weekly gain in two years on Friday, led by recent laggards such as insurer Aviva and media group WPP, as analysts recommended snapping up battered shares after a recent selloff.
Fund managers and traders cited a gradual wind-down in trading activity as investors cut risk before the holiday season. British supermarket chain Tesco, which has been trading at levels not seen since 2003, was up 4 percent.
"Trading has been volatile. Now investors are trimming positions ahead of the few days off, just wanting to reduce the risk," said Mark Ward, head of execution trading at Sanlam Securities.
Barclays, which had fallen 11.6 percent in just over a week, rose 1.0 percent after the judge overseeing New York state's lawsuit accusing it of fraud in its alternative trading system raised questions about the case.
At 11:21 a.m., the broader FTSE 100 index was up 0.6 percent at 6,503.86 points, adding to a 2 percent rise on the previous day and setting it on course for a 3.2 percent increase for the week, the biggest since November 2012.
Britain's public finances improved sharply in November, official data showed on Friday, helped by a fine on banks hit by a foreign exchange trading scandal.
Global equities have been rallying since the Federal Reserve Chair Janet Yellen said on Wednesday that U.S. interest rates were unlikely to rise for "at least a couple of meetings," meaning April at the earliest.
Before this bounce, the FTSE had fallen nearly 9 percent in 1-1/2 weeks, as a slide in commodity prices hit energy and mining stocks and concerns about Russia's financial stability cast a shadow on emerging market economies.
"When these turns happen quickly, there's fear of missing out," Ian Williams, a strategist at Peel Hunt, said. "It may be that we need the dust to settle and people to reconsider things in January before we get a real idea of whether this rally is sustainable."
Bernstein said insurer Aviva was "a last minute Christmas bargain" and upgraded the stock to outperform from neutral after a 15 percent fall in the stock since the announcement of a deal to buy Friends Life in November.
Aviva's shares rose 1.1 percent on Friday.
"We believe the recent sell-off provides an attractive entry-point into the stock, even for those – like us – who
are only prepared to value the synergies and cash return," the analysts wrote in a note.
Shares in WPP rose 2.2 percent to the top of the FTSE as Citi raised its recommendation on the stock to buy from neutral after an 8 percent fall since early December.
"Valuation now stands at almost a 5-year low vs. the market," Citi's analysts wrote. "We continue to have concerns about the agency model, but think risk/reward for WPP looks positive."
(Reporting By Francesco Canepa; Editing by Angus MacSwan)