London's FTSE indexes on track for weekly gains; geopolitics in focus

Feb 20 (Reuters) - Britain's FTSE indexes gained on Friday and were set to end the week higher, led by defence stocks, while expectations for a March rate cut from the Bank of England and easing AI-disruption worries globally also aided sentiment.

The blue-chip FTSE 100 .FTSE was up 0.6% at around 1134 GMT and was trading just shy of a record high, while the domestically focused FTSE 250 .FTMC rose 0.5%.

Geopolitical tensions between Iran and the U.S. and the greater likelihood of defence cooperation within Europe helped defence stocks .FTNMX502010 gain 6% this week.

On the earnings front, Aston Martin AML.L fell 1.4% after the luxury carmaker warned of a bigger annual loss and said it plans to sell the right to use its name on the Aston Martin F1 Team to bolster its finances after a challenging year.

The broader auto sector .FTNMX401010 lost 1.4% and was the only one in the red.

Anglo American AAL.L posted a $3.7 billion loss following another write-down in its diamonds business. However, shares added 1.3%, tracking higher base and precious metal prices.

Both FTSE indexes were on track for weekly gains, with the blue-chip index set for its biggest one-week jump in nearly two months.

Investors were relieved by data earlier this week that showed inflation was steadily nearing the central bank's 2% target. Strong manufacturing activity data and retail sales numbers on Friday, however, pointed to the risk of price pressures flaring up.

Still, traders see a 78% chance that the central bank will cut interest rates by 25 basis points when it meets next month to shore up the labour market.

AI-disruption concerns, which had roiled global markets earlier in the month, appeared to temporarily take a back seat.

However, simmering tensions between Iran and the U.S. were in the spotlight after President Donald Trump on Thursday warned Iran must make a deal over its nuclear program or "really bad things" will happen.

Among other movers, Diageo DGE.L rose 2.7% after a report said new CEO Dave Lewis is planning a major shake-up of his executive team.