By Shubham Batra and Sruthi Shankar
(Reuters) -The FTSE 100 closed higher on Friday after a jump in commodity-linked stocks offset losses in luxury group Burberry, but uncertainty around the outlook for interest rate cuts meant the main UK stock indexes logged weekly declines.
The blue-chip FTSE 100 climbed 0.6% on Friday, but the week's performance marked the second conecutive fall as investors unwound their bets on aggressive monetary policy easing this year.
The FTSE 350 precious metal miners index rallied by 3.3% as safe-haven buying supported gold prices after the United States and Britain launched strikes against sites linked to the Houthi movement in Yemen. [GOL/]
Defence company BAE Systems (LON:BAES)' shares climbed 2.2% to an all-time high following the escalation of geopolitical tensions. Shares of Rolls Royce (LON:RR) and Melrose also gained.
Shares of Burberry fell 5.5% to a three-year low after it blamed a worsening slowdown in demand for luxury goods for its profit downgrade, and warned of a challenge ahead as it launches a strategy to move upmarket.
"With U.S. demand also showing signs of significant weakness, it's been one-way traffic as far as share price declines are concerned, and today's trading update from Burberry has shown that the malaise around luxury remains in place," Michael Hewson, chief market analyst at CMC Markets, said.
Meanwhile, data showed Britain's economy grew slightly more than expected in November but remained at risk of a mild recession.
Gross domestic product (GDP) expanded by 0.3%, slightly beating economists' forecasts for 0.2% growth in a Reuters poll but output shrank by 0.2% in the three months to the end of November.
Sterling dipped 0.2% against the dollar and government bond yields fell as markets priced in a slightly higher chance that the Bank of England will begin to cut interest rates in May.
The midcap FTSE 250 index rose 0.5% but posted slim losses for the week.