London's FTSE 100 climbs as miners, defence outperform in data-heavy week

Dec 19 (Reuters) - London's blue-chip FTSE 100 finished higher on Friday, clinching its strongest weekly gain in nearly two months, as mining and defence stocks outmuscled a drag from homebuilders, in a week packed with major economic data locally and in the U.S., plus a rate cut.

The FTSE 100 .FTSE climbed 0.61% on Friday, capping a 2.6% weekly gain, its strongest performance since mid-October, in a week in which the Bank of England delivered a 25-basis-point rate cut and data that pointed to a weak economy and a deteriorating job market.

By contrast, the domestically focused midcap FTSE 250 .FTMC finished little changed, surrendering early gains after touching a seven-week high in intraday trade.

The BoE cut interest rates on Thursday after a narrow vote by policymakers, but signalled that its already cautious pace of easing could slow even further. Meanwhile, Britain racked up another hefty budget deficit in November and upwardly revised borrowing so far this year, underscoring the scale of the fiscal challenge facing finance minister Rachel Reeves.

Sector-wise, precious metals and mining .FTNMX551030 led gains with a 2.7% advance as silver prices hit a record high, while aerospace and defence .FTNMX502010 rose 1.6%.

BRITISH EQUITIES STILL OUTPERFORM

The FTSE 100 has climbed about 21.1% year-to-date, outpacing Wall Street's benchmark S&P 500's .SPX gain of 15.1%. This was largely driven by strong gains in UK financial stocks, particularly banks and insurers - which benefited from higher interest rates, undervaluation and resilient credit conditions.

Bank of England Chief Economist Huw Pill said earlier in the week that he saw a bigger risk of inflation getting stuck too high than too low.

Homebuilders .FTNMX402020, which are sensitive to the domestic economy, led losses with a 2.1% decline. Barratt Redrow BTRW.L was down 2.7% after Citigroup cut its target price to 506 pence from 530 pence. Bellway BWY.L and Berkeley Group Holdings BKGH.L were down 2.1% and 1.8%, respectively.

Among individual stocks, WH Smith SMWH.L fell 7% after the travel retailer forecast profit next year to stay almost at the same levels as 2025, as it reviews some of its North American businesses after accounting failures in its U.S. operations exposed gaps in its financial controls. The UK's financial regulator has also opened an investigation into the company.

Shares of mid-size lenders OneSavings Bank OSBO.L and Metro Bank MTRO.L gained 2.8% and 0.3%, respectively, after both were reclassified by the Bank of England as transfer firms under the MREL regime, meaning if the banks ever faced collapse, it would be resolved by transferring their business to another firm, which reassures investors and depositors.

($1 = 0.7479 pound)