The FTSE 100 of Britain's leading shares ended 0.4 percent higher on Friday as high precious metal prices pushed mining stocks up, while Northern Rock buoyed financials on bid speculation. The main blue chip index ended up 27.7 points at 6,456.7 as an upbeat opening on Wall Street, led by technology shares, boosted UK investors.
Gold hit a 28-year high as the dollar's continued slide to record lows versus the euro raised the metal's appeal to speculative investors. Other precious metals also advanced, with silver rising to its highest in more than three months, platinum hitting its highest since early May and palladium touching a five-week peak. Vedanta added 3.4 percent, BHP Billiton gained 1.5 percent and Xstrata was up 1.9 percent.
Also on the upside, Northern Rock tacked on 4.9 percent after falling about 71 percent over the past week because of a funding and customer confidence crisis. Dealers said investors were bargain hunting.
Hedge fund RAB Special Situations, which typically takes opportunistic positions over a long term, has bought a stake of just over 6 percent this week. Traders said this showed some of the gloom surrounding the stock was lifting.
"The FTSE 100 has done really well today," said Richard Curr, head of dealing at Blue Index Trading. "Even Northern Rock looks like its calmed down a bit. Maybe it's a bit of respite the people have been looking for."
British Energy topped the FTSE 100 leaderboard, added 6.6 percent as traders said investors were switching from Drax Group into the nuclear power firm. Drax was 0.5 percent lower.
Property firm Segro, utility Kelda and power group Drax will be replaced by housebuilder Taylor Wimpey, mobile phone retailer Carphone Warehouse and Tullow Oil on Monday in the FTSE 100's quarterly rejig.
Also on the upside, Rolls-Royce was 1.8 percent higher after traders said Goldman Sachs had upgraded price targets in key auto stocks. Into negative waters, Europe's biggest home improvements retailer Kingfisher dipped 3.5 percent after brokers cut their price targets and earnings estimates.
UBS cut it price objective on the stock to 200 pence from 235 pence, while Lehman Brothers trimmed its target price to 248 pence from 275p. Traders also said Merrill Lynch had cut its earnings estimates.
Plumbing products and building materials distributor Wolseley shed 2.1 percent following weakness in US housebuilder stocks overnight and on negative expectations ahead of its results on Monday, traders said.
In other commodities, US crude rose above $81 a barrel, driven higher after companies shut output in the Gulf of Mexico because of a storm threat. On Thursday the oil price hit a record for the seventh straight session at $84.10. In the oil sector, BP gained 0.3 percent and rival Royal Dutch Shell lost 0.5 percent.
"The mood remains somewhat cautious," said one trader. "High oil and metal prices plus a weakened dollar all have the potential to stifle economic growth, while further fallout may well be seen from the sub-prime lending saga so there may be an unwillingness to keep pushing indices higher as we move towards the end of the quarter."
Among midcaps, London Stock Exchange (LSE) gained 6.7 percent, underlining the return of merger and acquisition that J.P. Morgan and UBS were placing shares in the group, the subject of stake-building attention from both Dubai and Qatar.